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Chapters 14 and 15 in Competition Demystified: Nintendo and Ethyl Corp. Case Studies

Price is what you pay. Value is what you get.–Warren Buffett

The issue with growth companies is always (1) whether the growth can be in fact be sustained into the future; and (2) whether those improved earnings have already been discounted at the time of purchase. All the evidence suggests that investors tend to overpay for growth. Our study suggests that paying more than 11 times five-year forward earnings for any kind of stock will be a unrewarding exercise; and that to beat the market convincingly lower ratings are still desirable. In the Templeton philosophy of investment, valuation is ultimately the constraint that limits any investor’s capacity for making consistent and repeatable gains. –page 165 of Templeton’s Way with Money by Jonathan Davis and Alasdair Nairn

Chapter 14: Cooperation without Incarceration: Bigger Pies, Fairly Divided

Study Questions:

  • What are the three parts of the “fairness principle” needed to sustain cooperation?
  • What are the benefits in analyzing how an industry and its players could cooperate even when there is no chance that the companies in a particular industry can overcome their competitive behavior?

Chapter 15: Cooperation: The Dos and Don’ts

Read the Nintendo case:HBS Nintendo in Video Games Case Study

Then try the study questions:

  • Describe the “virtuous circle” that Nintendo enjoyed when it dominated the 8-bit games market.
  • What were the major reasons Nintendo’s position as market leader deteriorated?

A good book to study for these cases is Co-opetition by Adam Brandenburger and Barry Nalebuff: http://www.consulttci.com/Book_reviews/coopetition.html

If you can’t read the book, then see the slides:Nalebuff and Coopetition Slides and also:http://www.provenmodels.com/593/co-opetition/brandenburger-nalebuff

Ethyl Case Study:HBS_Ethyl Corporation in 1979_Case Study

Robert Robotti’s Investment Thesis on (page 25) :Robotti Mention of Ethyl

Study Question:

  • In the lead additive market, what were the four or five major reasons the competitors maintained high profits despite a continually shrinking market?

Austrian Economics or (Anti-Keynesian) Policy Works in Sweden

http://mjperry.blogspot.com/2012/05/anti-keynesian-supply-side-tax-and.html Surprise!  Interference and coersion distorts price signals that impedes the efficient allocation of resources thus destroying wealth.

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