Question

Thomas Schelling, an expert on nuclear strategy and arms control, observed in his book The Strategy of Conflict, "The power to constrain an adversary depends upon the power to bind oneself." Explain this statement using the concept of strategic commitment. Use an example from either your own business experience or economics-related research in your explanation.

Answer 1

The strategic moves of any business always achieve their desired effects and require strict principles and adherence to the stance that the business has taken. The strategic moves that are not credible to the business are not taken into consideration by the rival firms.

Explanation:
In the commitment strategy, the decisions of the rivals firms are not of any importance but the loyalty of the firm that cannot be compromised. The commitment is a decisive action for the committing firm to increase their payoff. The firm needs to be loyal and should be binding on its activities and the commitments should be credible and strategic value. Some other decisions taken by the firm may become the best decision in the commitment. The action that the firm proclaims to do need to show the aggressiveness it has.

An example of a firm that has applied strategic commitment is Apple that has strived for innovation, excellence, and quality. This has been of great advantage to the company because it has become more transparent, improving research and creating innovative products. Innovation has become the culture of apple but not just a process. By building a successful innovation system to harness creativity, then Apple has shown strategic commitment.