SUMMARY – FOUNDATIONS
OF INTERNATIONAL STRATEGY
Exam preparations for the final exam of semester 1
BY: JEFFREY ENGELS
,TABLE OF CONTENT
Study guide……………………………………………………………………………………………………………………………………..p.2
Lecture Notes…………………….……………………………………………………………………………………………………p.3-p.21
Lecture 1. Introduction / Markets and organizations……….……………….………………….………p.3+p.4
Lecture 2. information……………………………………………………………………………….………………….…….p.5
Lecture 3. Game theory ……………………………………………………..………………………………………..p.6+p.7
Lecture 4. Agency theory ………………………………………………………………………………………….………..p.8
Lecture 5. Behavioural theory of the firm …………………………………………………………………..p.9+p.10
Lecture 6. Transaction Cost Economics……….……………….…………………………………….………p.11-p.13
Lecture 7. Evolutionary Approaches……….……………….………………………………………..………p.14+p.15
Lecture 8. Contributions to Business Strategy I……….……………….………………….……………p.16-p.18
Lecture 9. Contributions to Business Strategy II……….……………….………………………..…….………p.19
Lecture 10. Organizational Learning………………………………………………………………………..p.20+p.21
Book Summaries……………………………………………………………………………………………………………………p.22-p.48
Chapter 1 - Markets and organizations..…………………..……………………………………….………p.22-p.25
Chapter 2 - Markets………………………………………………………………………………………………….p.26+p.27
Chapter 3 - Organizations………………………………………………………………………………………….p.28-p.30
Chapter 4 - Information………………………………………………………………………………………….…p.31-p.33
Chapter 5 - Game Theory…………………………………………………………………………………………..p.34-p.37
Chapter 6 - Econs and Humans………………………………………………………………………………………….p.38
Chapter 7 - Behavioural theory of the firm………………………………………………………….…….p.39-p.41
Chapter 8 - Agency theory………………………………………………………………………………………..p.42+p.43
Chapter 10 - Economic contributions to business-competitive strategy……………………..p.44-p.46
` Chapter 11 - Economic contributions to corporate strategy………………………………………p.47+p.48
Practice test (based on the lectures)……………………………………………………………………………………………..p.49
Answers to the test……………………………………………………………………………………………………………………….p.50
1
,Study guide
Course learning objectives & assessment goals
After completing this course the students should be able to:
1.) Explain the limitations of standard microeconomics approach (also called SET, Standard
Economic Theory) with respect to the questions of firm existence and decision making.
2.) Use recent theoretical approaches in Economics and Management that better explain firm
existence and decision making. These recent theories include Information Theory, Agency
Theory, Behavioural Theory of the Firm, Evolutionary Economics, Organizational Learning
Theory, Transaction Cost Economics.
3.) Explain what limitations of the SET each approach addresses.
4.) Analyse and compare the assumptions and predictions of these approaches.
5.) Analyse a real firm, or real business situation, and its strategic decisions using the theoretical
frameworks discussed.
6.) Present in English and work in teams effectively.
Exam lay-out
The final exam for ‘Foundations of International Strategy’ consists of multiple-choice questions
related to the theory. The exam will be 45% of the final grade.
Personal opinion
Foundations of International Strategy is without a doubt a thorn in everyone’s back this year with
troublesome lectures and incomprehensible book chapters. Yet, luckily, the theory presented is not
difficult. It is just numerous. It is recommended to thoroughly go through the summarized lecture
session in this summary and use the information of the book chapter more as an expansion of the
knowledge that you have learned from the lecture slides. Good luck in advance with the upcoming
exam!
2
, Lecture Notes
Lecture 1 – Introduction / Markets and organizations
Standard Economic Theory (SET)
SET is used to understand two main concept: the market and the organization. It is based on a
number of assumptions.
SET: Markets
Markets allow Sellers & Buyers to sell & buy products. There exist markets for nearly all goods and
services. On Markets, economic exchanges (transactions) between a seller and a buyer are
coordinated by prices. Agents (both buyers and sellers) are “price takers”: they use an externally
fixed price. Here, price is a sufficient statistic. This means that it contains all the necessary
information for the decision to engage into economic transaction.
The market is ideal under certain assumptions:
- There is atomicity; many small buyers and sellers. No one can influence the price.
- There is free entry/free exit of firms
- There is perfect information
- Products of homogeneous
A market participant is called a ‘Homo Economicus’. These people have complete information about
the market conditions and have a goal to maximize wealth (sellers maximize profits, and buyers
maximize utility).
On markets, decisions by economic agents are very limited, related only to quantities.
Firms
In SET, firms are holistic entities: single unified entity, no people inside the firm. These firms can be of
any size. They do not have a strategy, they either adapt to the environment or they disappear.
In a situation of perfect competition, firms cannot earn any economic profits (above “normal”) in the
long run.
3
OF INTERNATIONAL STRATEGY
Exam preparations for the final exam of semester 1
BY: JEFFREY ENGELS
,TABLE OF CONTENT
Study guide……………………………………………………………………………………………………………………………………..p.2
Lecture Notes…………………….……………………………………………………………………………………………………p.3-p.21
Lecture 1. Introduction / Markets and organizations……….……………….………………….………p.3+p.4
Lecture 2. information……………………………………………………………………………….………………….…….p.5
Lecture 3. Game theory ……………………………………………………..………………………………………..p.6+p.7
Lecture 4. Agency theory ………………………………………………………………………………………….………..p.8
Lecture 5. Behavioural theory of the firm …………………………………………………………………..p.9+p.10
Lecture 6. Transaction Cost Economics……….……………….…………………………………….………p.11-p.13
Lecture 7. Evolutionary Approaches……….……………….………………………………………..………p.14+p.15
Lecture 8. Contributions to Business Strategy I……….……………….………………….……………p.16-p.18
Lecture 9. Contributions to Business Strategy II……….……………….………………………..…….………p.19
Lecture 10. Organizational Learning………………………………………………………………………..p.20+p.21
Book Summaries……………………………………………………………………………………………………………………p.22-p.48
Chapter 1 - Markets and organizations..…………………..……………………………………….………p.22-p.25
Chapter 2 - Markets………………………………………………………………………………………………….p.26+p.27
Chapter 3 - Organizations………………………………………………………………………………………….p.28-p.30
Chapter 4 - Information………………………………………………………………………………………….…p.31-p.33
Chapter 5 - Game Theory…………………………………………………………………………………………..p.34-p.37
Chapter 6 - Econs and Humans………………………………………………………………………………………….p.38
Chapter 7 - Behavioural theory of the firm………………………………………………………….…….p.39-p.41
Chapter 8 - Agency theory………………………………………………………………………………………..p.42+p.43
Chapter 10 - Economic contributions to business-competitive strategy……………………..p.44-p.46
` Chapter 11 - Economic contributions to corporate strategy………………………………………p.47+p.48
Practice test (based on the lectures)……………………………………………………………………………………………..p.49
Answers to the test……………………………………………………………………………………………………………………….p.50
1
,Study guide
Course learning objectives & assessment goals
After completing this course the students should be able to:
1.) Explain the limitations of standard microeconomics approach (also called SET, Standard
Economic Theory) with respect to the questions of firm existence and decision making.
2.) Use recent theoretical approaches in Economics and Management that better explain firm
existence and decision making. These recent theories include Information Theory, Agency
Theory, Behavioural Theory of the Firm, Evolutionary Economics, Organizational Learning
Theory, Transaction Cost Economics.
3.) Explain what limitations of the SET each approach addresses.
4.) Analyse and compare the assumptions and predictions of these approaches.
5.) Analyse a real firm, or real business situation, and its strategic decisions using the theoretical
frameworks discussed.
6.) Present in English and work in teams effectively.
Exam lay-out
The final exam for ‘Foundations of International Strategy’ consists of multiple-choice questions
related to the theory. The exam will be 45% of the final grade.
Personal opinion
Foundations of International Strategy is without a doubt a thorn in everyone’s back this year with
troublesome lectures and incomprehensible book chapters. Yet, luckily, the theory presented is not
difficult. It is just numerous. It is recommended to thoroughly go through the summarized lecture
session in this summary and use the information of the book chapter more as an expansion of the
knowledge that you have learned from the lecture slides. Good luck in advance with the upcoming
exam!
2
, Lecture Notes
Lecture 1 – Introduction / Markets and organizations
Standard Economic Theory (SET)
SET is used to understand two main concept: the market and the organization. It is based on a
number of assumptions.
SET: Markets
Markets allow Sellers & Buyers to sell & buy products. There exist markets for nearly all goods and
services. On Markets, economic exchanges (transactions) between a seller and a buyer are
coordinated by prices. Agents (both buyers and sellers) are “price takers”: they use an externally
fixed price. Here, price is a sufficient statistic. This means that it contains all the necessary
information for the decision to engage into economic transaction.
The market is ideal under certain assumptions:
- There is atomicity; many small buyers and sellers. No one can influence the price.
- There is free entry/free exit of firms
- There is perfect information
- Products of homogeneous
A market participant is called a ‘Homo Economicus’. These people have complete information about
the market conditions and have a goal to maximize wealth (sellers maximize profits, and buyers
maximize utility).
On markets, decisions by economic agents are very limited, related only to quantities.
Firms
In SET, firms are holistic entities: single unified entity, no people inside the firm. These firms can be of
any size. They do not have a strategy, they either adapt to the environment or they disappear.
In a situation of perfect competition, firms cannot earn any economic profits (above “normal”) in the
long run.
3
