Recently, the Beijing Winter Olympic Games are underway, attracting global attention. In fact, few people know that the Olympic Games, which attracted the world's attention, were once in financial crisis, and in the 1970s, Germany and Canada suffered huge losses because of the "hot potato" of the Olympic Games. It wasn't until 1984 that the Los Angeles Olympics spread its financial resources and achieved a profit of $215 million. Among them, the game approach has played an important role and greatly enhanced the value of participation in the Olympic Games.
In fact, whether it is the competition and cooperation between enterprises, or how individuals get out of the predicament, game theory will be applied to a greater or lesser extent. In the CeRF-Europe classroom, Professor Zhou Dongsheng, a marketing scholar, analyzed the application of game theory in a simple and simple way, accompanied by a large number of cases, including the 1984 Los Angeles Olympic Games.
1
How to make money from the Olympics
The quadrennial Winter Olympics are in full swing in Beijing! The success of this Winter Olympic Games has benefited from China's effective prevention and control of the epidemic and its complete Olympic preparations. However, looking back at the previous Tokyo Summer Olympics, it was not so smooth, from the "Tokyo 8 Minutes" at the closing ceremony of the Rio 2016 Olympic Games, Shinzo Abe transformed into Super Mario's stunning debut, to the postponement of the Olympic Games 5 years later, no one thought that the Tokyo Olympics would have such a gap.
Huge epidemic prevention pressure, overspending budgets, and huge losses in ticket and tourism consumption revenue caused by empty venues have made the Tokyo Olympics undoubtedly a "money-losing business". Some analysts believe that the economic loss of the Tokyo Olympics may be more than $10 billion.
However, this is not the first time the Olympics have been in financial crisis.
In 1896, the first Olympic Games, initiated by the Frenchman Coubertin, were held in Athens. In the beginning, charitable donations and government expenditures could also cover the cost of the Olympic Games, but as the Olympic Games became more and more popular, they also became more "cash-burning".
At the 1972 Olympic Games in Munich, Germany, it lost 686 million marks; in 1976, montreal, Canada, it lost a huge loss of 990 million US dollars. The Olympics became a "hot potato", which directly led to Los Angeles winning the right to host the 1984 Olympic Games without an opponent.
The turning point occurred in 1984.
Uberos, the organizer of the 1984 Los Angeles Olympics, with no government subsidies, no burden on taxpayers, and no lottery tickets, spread his pockets by selling television rights, introducing sponsors, and other market-oriented means, not only achieving no losses but also achieving a profit of $215 million.
The Olympics have since become a tempting big cake.
How did Uberus make money for the Los Angeles Olympics? And how to greatly enhance the value of participation in the Olympic Games by using the game method (changing the five elements of the game):
Rules of the Game: Uberos set a unique rule of the game: the auction price of the rights is determined by the number of people watching the game. He invited the three major US tv stations ABC, CBS and NBC to participate in the auction. In the end, more than 2.5 billion people around the world watched the Televised Olympic Games, costing ABC $280 million for the rights.
Participants: In order to auction higher prices, Uberos invited high-level athletes from Africa, Asia, Eastern Europe and other countries to participate through the construction of the Olympic Village, and it is worth noting that this is the first time that the Chinese team officially participated in the Olympic Games and sent a strong lineup. Uberrose strives to create intense, exciting events that will gain wider attention and a larger audience.
Value of Participants: For sponsors of the Olympic Games, Uberrose established a sponsorship rule of "only one per industry, at least $4 million." By creating shortages and limiting participants, it attracted bigwigs from all walks of life at that time (Coca-Cola, IBM, etc.) to participate in the Olympic Games in the form of exclusive sponsorship rights, which increased the value of participants.
Game strategy: At the same time, in order to let more ordinary Americans pay attention to and participate in the Olympic Games, Uberrose also creatively launched the Citizen Torch Relay Run, openly selected torch relay players, enhanced the recognition of the Olympic Games in the hearts of ordinary people in the United States, and raised donations.
Scope of games: In 1985, the International Organizing Committee of the Olympic Games conceived the launch of the Global Partnership Program, which further expanded the scope of games for the Olympic Games and created value for the core target customers of the Olympic Games, multinational corporate sponsors, in time and space.
Through a series of effective games, the Olympic Games have transformed from a loss-making, unattractive sporting event into a global event.
The game is not a simple competition, but both competition and cooperation, which is competition and cooperation.
The essence of the game is to give up, give up first and get later: when making decisions, we must know how to give up appropriately, and we must motivate more participants to make a big cake together. Only when the cake becomes bigger can it be possible to achieve a lasting win-win situation.
Limited by space, the following is from the first three elements of the game: the rules of the game, the value of participants and participants to explain how to play an effective game.
2
Recognizing the rules of the game is the first step in the game
No rules, no squares. Reasonable rules of the game are the premise of the survival and development of any enterprise, and recognizing the rules of the game is the first step in the beginning of any game.
If there are unreasonable rules in the market or the implementation of rules is not in place, or the information is asymmetrical, then the market can not only not survive the fittest, but also may lead to bad money to drive out good money.
The trading of shares of listed companies is one such case. The directors and supervisors of listed companies (directors, supervisors, senior management – insiders) have a better understanding of the operation of listed companies, and ordinary investors will not know more about the company than insiders even if they do due diligence by professional investment institutions.
If there are no rules that allow everyone to buy and sell stocks at will and pursue the maximization of their own interests, then the directors and supervisors can use the advantages of information to make profits, and the securities market will be chaotic.
Therefore, the CSRC stipulates that listed companies must disclose information: every six months and one year, they must publish annual reports; they also stipulate that directors and supervisors cannot buy and sell stocks for a period of time before and after the disclosure of major information, and try to solve the problems caused by information asymmetry by formulating these rules.
So how do you set the right rules of the game? The rule should be developed with the participation of all persons or their representatives who will be affected by the rule, and the impact of the new rule should be comprehensively analysed.
A good rule-making process must be decentralized, and the rules should most clearly limit the power of the number one. If one party has absolute power, or even all of it, when making the rules (both a referee and an athlete), then the outcome of the game is certainly unfair.
In addition, some of the rules of the game are gradually evolved by the market. Whoever can accurately identify these new rules/trends will get a head start.
3
Bring in a variety of participants to make a big cake together
How are the participants in the game defined? Anyone or institution that has an impact on the outcome of the game is a participant in the game. When defining participants, we must use our imagination.
The participants of the Olympic Games are not only athletes on the field, but also referees, coaches, cheerleaders, etc. In this sense, the Tokyo Olympics were indeed a discounted Olympics.
Identifying participants can be analyzed using a value network. There are five categories of participants: customers, rivals, suppliers, complementarists, and "I."
"I" is in the middle, and the other four types of participants work with "I" to create value for the customer. No matter how big "I" am, it is impossible to complete all the activities that create value for customers.
Before making any major strategic decision, the value network should be redrawn. Sometimes, it is not enough to draw your own value network, but also to draw the value network of your main competitors.
We will find that many participants appear on both value networks (i.e. my value network and competitor value network) at the same time. At this point, we have to do a detailed analysis of which of these participants are more closely related to me and which are closer to my competitors.
As the saying goes in The Godfather, "To know your friends, you have to know your enemies."
Derived from the course PPT
Always ask when making decisions: Who are my friends? Who is my enemy? In China, the environment changes rapidly, and yesterday's friends may become today's enemies. Therefore, we must always think about these two problems, and we cannot use tactical diligence to make up for strategic laziness.
client
It's not enough to just stare at your own direct customers, a good game strategy is to stare at the customer's customers, that is, the person who ultimately pays the order.
Promotion, low price and more selling, is not the skill, because after selling, it does not produce new demand, it is nothing more than the manufacturer's inventory into the customer's inventory, and even there will be the risk of returns - disrupting the supply chain of the enterprise.
The strategy of a good game should be to promote "elimination", only by consuming, consuming, and eliminating, can new demand be generated.
Bright Dairy didn't know how to market at first, but later learned from Danone in France. Danone's experience is to look at the scene needs of the target customer, such as white-collar workers getting up at 7 o'clock in the morning and going to bed at 11 o'clock at night, what the behavior trajectory of the day is.
In the natural behavior trajectory, is it possible to implant milk into her scene, such as drinking afternoon tea, adding milk to the tea, and coating milk on the biscuits she eats, constantly allowing her to consume, so that new demand will be generated.
How does Michelin, the world's largest tire brand, sell more tires? Michelin tires appeared as early as 1900 years ago, when there were only 3,000 cars in france, in order to increase sales, it produced a "Michelin Guide", free of charge in gas stations and repair shops, driver friends can take it at will.
The Michelin Guide has a lot of descriptions of the routes, for example, there are two lines A and B between the two cities. Line A is in good condition, while Line B is more rugged and wears out tires faster.
So how do you get everyone to take this rugged B line? On the B route, you will be marked with some places worth visiting: waterfalls, parks, and of course delicious restaurants, and then star this restaurant, which was first only one star, then two stars, three stars, and then "Michelin Restaurant" also became a brand.
competitor
De Beers is a world-renowned diamond brand, "Diamonds last forever, one will live forever" is its marketing slogan. De Beers did a good job of diamond marketing, and the gross profit was very high, which attracted a lot of people to offer diamonds. But natural diamond mines are cumbersome to mine and have limited supply.
Later, some people began to invent artificial diamonds, especially silicon valley venture capitalists, who managed to synthesize artificial diamonds in the laboratory with high temperatures, artificial diamonds are almost exactly the same as natural diamonds, and they are more fashionable and more environmentally friendly. The British princess began to use it, the stars also used it, and artificial diamonds slowly became popular.
De Beers was initially passive in the face of competition, developing a device that could detect whether a diamond is natural or artificial, helping consumers identify it. But it doesn't work well because consumers can't buy a device to go home and specifically test diamonds.
De Beers later set up a sub-brand dedicated to artificial diamonds. How is the number one challenge: is it priced higher or lower than other brands of artificial diamonds? Will its artificial diamonds erode the market for natural diamonds? These are challenges.
De Beers launched its own artificial diamond brand Lightbox on May 30, 2018, and its price is much lower than other artificial diamond brands, De Beers natural diamonds are nearly ten thousand dollars a carat, existing artificial diamonds are about a few thousand dollars a carat, and Lightbox is only priced at $800 a carat.
So as soon as it was launched, the price of the opponent's artificial diamond was all pulled down, and consumers suddenly understood that the artificial diamond was not a real diamond. De Beers took the initiative and destroyed the value of artificial diamonds by launching low-priced competitors.
Huawei has a special agency within the company, the Blue Army Staff, whose task is to oppose the tune, and the company gives these "Blue Army" data and funds to let the Blue Army provoke Huawei's existing business and new strategy: instead of being caught off guard by opponents in the market, it is better to take full precautions internally in advance.
The positioning of the Blue Army Staff is to simulate various threatening voices, build the organization's self-correction ability, promote the establishment of Red and Blue Army confrontation at all levels, and make the company go in the right direction through continuous self-criticism.
Many of Huawei's internal executives were promoted from the Blue Army Staff Because they knew the Red and Blue Army very well. Just as the so-called "know thyself and know each other, never lose a battle", in the fierce competitive environment, we must pay close attention to the dynamics of competitors.
vendor
Latecomers, it is not enough to do well on their own. It must look for a greater competitive advantage throughout the supply chain. The success factor of the latecomer enterprises is often strong supply chain management.
Why is supply chain management so hard? For its essence is a prisoner's dilemma. The decisions made by each participant in the supply chain affect not only him, but also the upstream and downstream of the supply chain.
We know that the only way out of the prisoner's woes is to build trust. Similarly, good supply chain management has a "chain master", and the main task of the chain owner is to build trust and make each participant in the supply chain give full play to their own advantages.
There are three key points to doing a good job in supply chain management: risk, value, and competition.
Supply chain management is the first to control risk. In the case of controllable risk, what needs to be done is to maximize the total value of the supply chain. How do you do this? It is necessary to use the strengths and avoid the weaknesses, and the advantages of each participant are different.
For example, in Lenovo's supply chain, Lenovo is the chain owner, its advantage is the brand, you can obtain funds at low cost, the disadvantage is low efficiency, the cost is relatively high; its supplier's advantage is fast, low cost, the disadvantage is that it is more difficult to obtain funds.
Lenovo creates greater value for the entire supply chain by leveraging the strengths of each participant. There should be moderate competition at every level of the supply chain, not exclusivity. Exclusive suppliers will become lazy for a long time, and the impetus for change is not enough.
Generally speaking, every company must have at least two or three suppliers, one of which is a strategic supplier and the other one or two are standby, both competitive and cooperative.
Complementary
Increasingly fierce market competition makes the main performance of many products become similar, and enterprises can only continue to create value for customers by constantly introducing new complementary products (supporting products or value-added services).
What is a complementary? Complementarity of a product or service refers to any other thing that can make that product or service more attractive. Providing novel complements is an important measure for the rapid development of enterprises.
Case 1
In the decade from 2001 to 2010, there were a total of 13 IMAX cinemas in China, but in the decade from 2011 to 2020, the number of IMAX cinemas in China exceeded 400, achieving explosive growth.
The technology of IMAX cinemas did not change much in 2010, but the value of IMAX cinemas was fully represented because of the film (content).
After the release of the movie "Avatar", movie tickets were difficult to find, and scalpers raised the price by five or six times. Many cinema industry players believe that "Avatar" has greatly driven the development of IMAX cinemas in China.
So the owner of IMAX technology (a Canadian company) saw that IMAX cinemas were so popular in China, so they spun off its Asian business and set up an independent company called IMAX Asia, which quickly went public in Hong Kong by bringing in powerful Chinese investors.
Case 2
After Jobs returned to Apple in 1997, one of the most important products he developed was the iPod. At that time, MP3 was already a Red Sea market, the high-end had Sony, the low-end had two or three hundred yuan of Chinese products, but the iPod still hit a piece of the sky, sold tens of millions of units in the United States, how did it do?
The iPod is a piece of hardware, and its most important complementary product is the song (content).
When MP3 was popular, the biggest pain point of the record company was piracy, so Apple launched iTunes not long after the launch of the iPod, focusing on genuine songs.
A song sells for $0.99, it gives $0.77 to the record company, $0.2 to the credit card company, and only $0.02 for itself, which means that Apple doesn't make money on the song, and it makes money entirely by selling the iPod, because the iPod is completely controlled by Apple.
Give the record company and other partners full encouragement, and everyone will reach a high degree of cooperation and share the cake together.
We talk about customers, competitors, suppliers, and complementaries around the value network, but who are we?
Especially for large companies, you will find that while you are competing with opponents, other departments are cooperating with it, for example, Apple and Samsung are definitely competing, but Samsung is apple's supplier, which is the situation that exists between enterprises that is both competitive and cooperative.
4
Strive to enhance the value of participants
The value of your participation = the size of the market when you participate in the game - the size of the market when you are not participating in the game.
Two ways to increase participant value
If you leave the market and cause the entire market to shrink significantly, it means that your participation value is high. Companies with high participant value usually have strong market monopoly capabilities, which can help companies obtain high profits. There are generally two ways to increase the value of participants:
Differentiated monopoly capabilities through innovation
Apple invented the smartphone in 2007, and consumers lined up to buy its stuff, and it set a high price. But if Apple doesn't have a sustained ability to innovate, it can't get consistently high profits. Real monopolies don't exist, especially in high-tech industries, and the competitors of monopolists are their own yesterday.
Build a strong brand and create network effects in the form of chain operation or the Internet
Network effect refers to the fact that the value of a user is affected by the total number of users of the product. After the advent of the mobile Internet era, the network effect is particularly obvious, once the total number of users of a product reaches a certain critical point, it will bring explosive self-growth. So what companies have to do is to break through this tipping point as soon as possible.
Why is Microsoft's operating system so hard to replace? Because most of the operating systems of the current computers are Microsoft's, even if the operating system of the latecomers is better, it is still free, it is difficult to replace Microsoft, because the user's documents/materials are locked by the Microsoft system with strong network effects.
Not only Internet companies, but also traditional offline enterprises can also create network effects. From foreign chain fast food mcDonald's and KFC to the new domestic consumer brands Xicha and Yuanqi Forest, they are quickly copied through the establishment (standardization) of brands and chain operations, creating a strong network effect.
What if your participant value is low?
In many cases, the size of the market after a participant enters and leaves the game will not change significantly, that is to say, its value to the participants of the entire game is relatively low, but this does not mean that it does not have the value of participation, because its participation will break the original equilibrium.
Therefore, we want to analyze whether the new participants enter the game and whether it will cause changes in the value of participation of other participants. The case of the Dutch sweetener company can give you some enlightenment:
In the 1970s and 1980s, the carbonated beverage market in the United States was basically occupied by Coca-Cola and Pepsi. As people pay more and more attention to health, consumers find that the sugar content in cola is too high, which is easy to cause diseases.
At that time, a small company invented a sweetener (sugar substitute) that was as sweet as sugar, but the calories were only 2% of sugar.
The small company was later acquired by Monsanto, who named the sugar substitute NutraSweet and printed the logo on the outer packaging of Diet Coke and Diet Pepsi, because of patent protection, Monsanto monopolized the sugar substitute market, selling $700 million a year and gross profit of more than 70%.
In 1987, Monsanto's European patent expired, there was a Dutch sweetener company that could produce new sweetener products through years of research and development, and after 1987 began to sell in Europe, after Monsanto's monopoly was broken, NutraSweet was forced to sell from $70 a pound to $30.
The real goal of dutch sweeteners is to be ten times the U.S. market in Europe (Monsanto's U.S. patents expire five years later than European patents), so the company's senior management visited Coca-Cola and Pepsi a few months before the expiration of the U.S. patent to understand the attitude of the two companies towards the Entry of Dutch Sweeteners into the U.S. market, and the two Coke companies certainly welcomed it.
Dutch Sweeteners was pleased to spend tens of millions of dollars to build a large sweetener factory, ready to do a big job.
Before the factory was built, the Dutch sweetener company heard bad news: Monsanto signed a 10-year long-term contract with two Coke companies, giving two Coke companies a $200 million a year. The Dutch Sweetener Company was "stupid" and the war was over before it even started.
If you're a Dutch sweetener company, how do you play for profit in the first place? Dutch sweetener company is the second entrant in the monopoly industry, in the market is unknown, the quality is not necessarily stable, the cost is not necessarily low, selling sweeteners It has no advantages.
After the Dutch sweetener company enters the market, consumers will not drink more sweeteners, so its value to the participants in the entire industry is very low. But after it entered the market, there was competition in the sweetener market, Monsanto's monopoly was broken, and the two Coke companies became strong.
So, Dutch sweetener companies shouldn't sell sweeteners, it should sell "competition.". Without it the sweetener market there is no competition, with it this market there is competition. Previously, in the European market, the entry of Dutch sweetener companies forced Monsanto's sweetener products to cut prices by more than half.
Since then, Monsanto has been willing to give $200 million a year to the Coke Company, also because of the value created by the entry of the Dutch Sweetener Company.
Therefore, before entering the US market, the Dutch sweetener company should confirm more detailed terms with the two Coke companies, such as promising orders and a certain amount of subsidies. If you build a factory and then negotiate, you will be passive.
Before developing any strategy, look forward and reason backward: To predict, how much of a participant in this game will be worth? Who will benefit from my entry into this game? Who will be damaged by my entry?
The beneficiary participants will be willing to pay me to play the game, while the damaged participants will pay me to stay away from the game.
5
Game: There is both competition and cooperation
"Game theory" is the study of how decisions are made in the context of mutual influence. Most of the decisions we face, such as between individuals, between businesses, and between countries, can be analyzed in terms of game theory.
But most people equate the game with competition, conflict, and confrontation, as if the so-called game is a deception between the participants, taking advantage of each other as much as possible.
The right game should be both competitive and cooperative. People who can play games are good at listening and willing to share. Only by giving up can we get it! Dr. Kissinger once said that "great causes must have a rich imagination", and a good game strategy must be innovative and can achieve a win-win situation.
Finally, I would like to summarize it with Shakespeare's famous quote:
“
The whole world is a stage.
Every man and woman is just an actor:
They have their own time to play and exit;
Many people play multiple roles during their own appearances.
”
Life is a game that must be participated in, and I wish everyone a more exciting game in the future life!
The creative images in this article have been authorized by Hero Gallery, if you need to reprint and use, please contact its authorization.
The source | CEIBS Entrepreneurship Camp
Edit the | Subliminal thoughts
What do you think is the nature of the game? Feel free to leave a message to share your views. The 3 highest likes, we will send a copy of the CeIBS knowledge note "Future Answers"