A number of articles have been published on the application of game theory to business situations (Arend and Seale, 2005;

Ghemawat, 1999; Parkhe, 1993;Smit andAnkun, 1993). However, an essential problemalways surfaceswhen this theory is applied to the business world:what is the right gameto play now? This is precisely, the issue of this paper seeks to address, and which has already been discussed by Brandenburger and Nalebuff (1995), who emphasizing the need to choose the right game to play, hold that a player can play both cooperative and competitive type games at a given time, through behavior they call co-opetition. Nevertheless, the cooperation-competition dimension employed by these authors proves insufficient to explain all the games that could be played in each particular conflict of interest situation. This study therefore addresses this matter in further depth and expands on the original concept of co-opetition. The main objective of this study is to provide scholars and managers with a tool, based on the tenets of game theory that allows identification of which games can be played in each conflict of interest situation faced by companies in their operating environments. Different types of concepts of strategy contents: Before we further focus our discussion on the types of strategy used in this study, based on game theory, it will be useful to present a broader perspective of the various concepts of business strategy and where each of these approaches can be found.

Methodology A matrix called the SGM is obtained by combining the three player posture assumptions with the three power ratio assumptions. The matrix has nine cells representing nine typical strategic situations, as shown in Figure 1. The nine cells of the SGM are referred to, respectively, as: hegemonic, leader, paternalistic, retaliatory, competitive, cooperative, marginal, follower, and solidary, as shown in Figure 1. These names seek to mnemonically represent each of the typical conflict-of-interest situations that the players may face. Each of the nine cells of the matrix represents a typical situation of strategic games. Four classical games in game theory correspond to the five central cells of the matrix. But there are no classical games corresponding to the four cells located in the vertices of the SGM. Two new games should therefore be added to the classical games mentioned, in order to complete the mapping of all the cells of the matrix

The present study expanded on the co-opetition concept proposed by Brandenburger and Nalebuff (1995) and addressed the research problem of how to know which the right game to play is. We were able to answer the four basic research questions formulated in the introduction: (1) The question Are competition and cooperation the only two models of behaviour that executives should consider before deciding what game to play? was answered by showing that, besides cooperation and competition, there are at least three important, distinct and mutually exclusive types that may be used to describe the competitive postures any given player can assume toward the other players: rival, individualistic and associative. (2) The question Does the power ratio among players define different games to play? was answered by showing that there are at least two types of assumptions of power ratios that players can assume in any given game: balanced and unbalanced power ratios, both of which serve to characterize different types of games to be played. (3) The question According to the concepts of classical game theory, what game should managers play in any given situation of conflict of interests, for each different situation of business they face? was answered extensively through the descriptive and prescriptive SGM conceptual model. (4) The question What are the possible consequences of choosing the wrong game in a typical situation of conflict of interests among players? was answered; in short, a player that chooses the wrong game may incur massive damages, both to objective results and to the relationship between involved parties. Furthermore, the consequences of choosing the wrong game are far worse in the long run than are those of making wrong decisions while playing the right game. We examined a broad range of situations of conflict of interests in the business world and came to the conclusion that another dimension besides competition and cooperation should be considered, namely, the power ratio among the players, when the question comes up as to what is the right game to play. This paper expands on the original idea of co-opetition by providing a broader

perspective for choosing a game to play. As a possible model for this choice, the SGM is described and applied in this paper. It indicates what games are advisable for each specific situation represented in the cells of the matrix. The SGM treats nine different situations resulting from the combination of three different degrees of competition/cooperation and three different degrees of power ratios among the players. From the nine different situations, we derived six new games to be treated. Four of these have already been treated and solved using the classical games, as Minimax, Pareto, Nash and Stackelberg games. The other two situations characterize two new games yet to be well-defined and solved: the paternalistic-solidary and the hegemonic-marginal games. Although these last two games have not yet been fully solved, they are characterized and mathematically described in this paper The SGM therefore met the research objective proposed for this paper: developing a game theorybased tool that may be used by scholars and managers alike to identify which games can be played in each conflict of interest situation faced by companies in their operating environment. Constructed with concepts taken from classical game theory and with elements of the business world, the SGM is an original descriptive analytic tool for interpreting, analyzing, clarifying and formulating business strategies and for supporting strategic management

Example : Case analysis An illustration: applying the SGM to the PC industry Inspired by the concept of network-value (Brandenburger and Nalebuff, 1995), in this section we will present an application of the SGM, as described above, in order to analyze strategic games in a complex business environment in the personal computer (PC) industry. For this purpose, we will use the Intel Corporation case study (Collins and Pisano, 1999) as transcribed in Ghemawat (1999). The chosen case study encompasses a long period of time in the history of the Intel Corporation (1968-1997), but the present application is focused on the competitive business strategies used by Intel and its counterparts from 1990 to 1997. The business environment at the Intel Corporation during the studied period involved several types of companies: PC manufacturers (Apple, IBM, Compaq, Toshiba and others), production equipment suppliers, producers and suppliers of software for operational systems (such as Microsoft), Intel licensees that manufacture microprocessors with its technology, as well as main Intel competitors (such as AMD) and even manufacturers of clones of Intel microprocessors. We began by carefully identifying the players involved in the various aspects of the PC industry, including their relationships, conflicts of interests, power ratio assumptions and objective functions. Taking the Intel Corporation as the central focus of the analysis, as shown in Figure 4, two classes of games are clearly characterized in this case: three games with balanced power ratio assumptions, shown in Figure 4 by numbers 1, 2 and 3, and three types of games with unbalanced power ratio assumptions, indicated by numbers 4, 5 and 6. The following games were identified as having balanced power ratio assumptions: (1) The strategic games played among PC manufacturers were typical Nash games; the multiple manufacturers were fighting for share in the huge PC user market. In most cases, they were equally competitive with their products.

(2) The strategic game played between Intel and Microsoft was a typical Pareto game because the companies had to work in close cooperation to add more perceived value to their final products, with hardware and software designed in an articulated and complementary way, in order to be compatible with one another and address final users needs in an optimal manner. (3) The strategic game played between Intel and AMD was found to be a typical Minimax game, because both manufacturers compete for market shares in a market of a presumed limited size. The following games were identified as having unbalanced power ratio assumptions for their case: (4) The strategic game played between Intel (in a stronger situation) and various equipment production suppliers (the weaker players in this relationship) was basically a Stackelberg game, where Intel acted as the leader and the suppliers as followers. (5) The Intel case describes how Intel proposed that its clients PC manufacturers and therefore buyers of Intel microprocessors take part in a marketing campaign called Intel Inside, to increase Intels visibility in the eyes of end buyers; the strategic game played between Intel which, in this case, was the stronger player and PC manufacturers, in this case the weaker players, was a typical Paternalistic-Solidary game, especially in regard to the Intel Inside strategy, where Intel played the paternalistic role and the manufacturers, which associated with one another, played the solidary role; some manufacturers immediately accepted the Intel proposal; others, such as IBM, were quite reluctant at first, though they eventually accepted the idea. (6) The strategic game played between Intel (again acting as the stronger player) and the manufacturers of Intel-like microprocessor clones (the weaker players) was a typical hegemonicmarginal game. Since Intel could not destroy these manufacturers completely, it used strategies such as lower prices and continuous advances in technology in an attempt to curtail the size and reach of these small competitors so that they could not threaten Intels dominance over the market. This PC industry case shows that application of the SGM allowed integrated analysis, interpretation, clarification and formulation of the competitive and cooperative strategies for the rational treatment of conflicts of interests between the Intel Corporation and its clients, partners, suppliers, licensees and competitors, of varying sizes.