Leveraging Game Theory to Revolutionize the Phone Market
With enormous hype surrounding Apple’s recent announcement of its upcoming iPhone model, iPhone 6s, it is worth examining the actions and strategies that the company leveraged, which accounted for its massive success. In particular, game theory proven to be effective during Apple’s critical transition from an unknown player in the phone market 20 years ago to the dominant player that we all recognize in the phone market today.
iPhone 6s – Photo courtesy of Apple.com
The phone market involves numerous companies, each with its own unique competitive advantage. As a result, it could be difficult for a company to ascertain a dominant strategy when releasing new version or feature to their phone product. In our curriculum, when we cannot deduce a pure dominant strategy, we introduced randomization and delved into the advantage of being unpredictable, so that the unpredictable behavior can’t be taken advantage of. When releasing the iPhone nearly 20 years ago, Apple used this very strategy, of being unpredictable, and revolutionized the phone market in its favor.
The unexpected action that Apple took was that it changed the focus to software such as mobile applications and functionalities, rather than focusing solely on hardware (exterior, build, bulk, etc.).
As we learned, rivals have a difficult time reacting to an unexpected strategy. Accordingly, Apple quickly gained an advantage in the phone markets over prior leading rivals, Nokia and Blackberry. Apple developed iPhone software that worked exclusively for the iPhone. The software doesn’t work with any other phone, so rivals had a difficult time responding. As a result, Apple’s bold move in adjusting its focus to software gave it a big competitive advantage, and in addition, worked to mitigate the advantages of its rivals and made it hard for rivals to respond to their move. All in all, Apple not only understood the game, but also developed a strategy to change the game, and as a result, experienced enormously high profits in the phone market.
iPhone Evolution Infographic – Credit belongs to Mashable
Resource: http://www.ecornell.com/certificates/leadership-and-strategic-management/business-strategy-achieving-competitive-advantage/?of=A02B12C01D01E05F05G14H271I23K03, “The application of game theory to business strategy”