Businessmen must understand: Why are KFC stores and McDonald's always next to each other?

In the whole process of natural and social evolution, there is not only competition but also cooperation. From the point of view of social Darwinism alone, the world is very dark. But if you look at it from a super collaborator's point of view, the whole world is a resource that you can tap into. When we shop, shop, and walk on the road, if we pay close attention, we see that KFC and McDonald's are always close together, which are obviously competitors, but they seem to be just partnerships.

In fact, there is a method called game theory. The location of this large chain usually analyzes the local flow of people and the type of people. Additionally, the business models are similar and the market positioning is the same, so it's no surprise that they're coming together. So what is game theory? Today, I will introduce this book - "Game Theory". Humans are social animals and live in organizations. As long as there are more than two people in an organization and there are relationships between people, there is a place for game theory.

What is game theory?

Game theory, also known as game theory, is a branch of mathematics that deals with various conflict factors, or decision theory in conflict environments. Game theory is widely used in various fields. At the same time, game theory is also a frontier subject of social science, especially economics, and plays a very important role in modern economics. The four elements of the game are:

1. There are at least two or more participating parties, when only one party exists, there is no game.

2. To have interests, the interests of the participants are relevant and they must protect their own interests. If one party doesn't care about different outcomes or is willing to sacrifice its own interests, or if all parties have different interests, then there is no game.

3. Get comprehensive information. Information plays an important role in games. Only by knowing ourselves and ourselves can we win every battle.

4. Develop strategies based on the information you have. The ultimate goal of game theory is to maximize self-interest.

Competitive cooperation

1. Complementarity

Our business world is often influenced by social Darwinism and likes to talk about business wars, wolf culture and the brave who meet in a narrow way wins. We apply the logic of war to the marketplace. In fact, we misunderstood the logic of war. What we know is how to completely eliminate the enemy. We should learn to coexist with others and do our own business well by complementing each other. The more industries that complement you, the more stable your development will be. You should adapt to change and find new customers from change.

As you will see, the more complementary you are, the bigger your market will be. Sometimes, your competitors can also be your complements. For example, we found that competitors often get together, like an electronics street and a snack street. Why are they together? Complementarity of competitors actually creates a market because it creates agglomeration effects. So when we create markets, we complement each other. When this market was established, we were competing. When you think about this relationship, you have to think about the coexistence of both. That said, entrepreneurs should have two systems in mind. Knowing about game theory changes everyone's perspective when we are friends and adversaries. In particular, when creating a market, we should establish more complementary relationships and wait until the market is differentiated before competing.

2. Symmetry

Entrepreneurs today are very alert because competitors may come from other industries, so when looking at the value chain, everyone must pay attention to the symmetry of the value chain. If the customer's needs don't create value for your employees and partners, then the customer is wrong. So when you focus on customer needs, you should turn around and ask both your employees and suppliers what they need. Only in this way can a partnership be established.

In my opinion, a very bad phenomenon in the business system right now is squeezing suppliers and manufacturers. They don't develop well, which will make it difficult for the entire ecosystem to grow. We have huge production capacity, but the domestic consumer market cannot rise. This is not because domestic consumers have no money, and the income growth of migrant workers is faster than that of white-collar workers in first-tier cities. The reason is that there are a large number of small towns in China that brand owners cannot reach, and the distribution channels are not smooth.

In the past, building a brand and advertising, as well as building a sales system, required a lot of money. The cost of dissemination channels is also very high. Now that we have mastered distribution channels, offline supermarkets and online e-commerce have distribution channels, and Taiwanese businessmen also have distribution channels, so we try our best to squeeze suppliers. In fact, there are many facets to commodity competition, but only one dimension remains in current business models: price.

Basic Classification of Game Theory

Pricing Strategy

We often encounter pricing problems in business, which require knowledge of game theory and behavioral economics. Together they tell you one thing: The pricing strategy in economics, where pricing equals cost plus profit, is wrong. In fact, no company would do this. Pricing based on market supply and demand must take into account demand, which is very delicate. People don't know what they want or how to divide what they want.

Price wars are a double-edged sword. You can beat your competitors with low prices, but low prices can in turn affect your bottom line. Once you fight a price war, you will damage your enemy by 1000 points and lose 800 points. If you don't cut prices, you can make money, which is better. But if you don’t cut prices, customers will be taken away by merchants who cut prices, a classic prisoner’s dilemma. How to get out of this predicament? Take the lowest price promise.

In many cases, what you see on the surface is different from what you really want. On the surface, we can see that lawyers and teachers must obtain professional qualifications before they can pursue this profession. The reason is to strengthen management. The real purpose is to protect vested interests.

Summarize

This article briefly introduces some simple knowledge of game theory, and then provides a detailed explanation of the application of game theory in daily life and the workplace. Whether you are a professional elite, college student, or other professional occupation, you should take a good look at this useful book on game theory.