A Game Theory Model to Analyze Business Strategies for Increasing Profits: Analytical and Computational Approaches

UMW Holdings Berhad is a big company in Malaysia. We found that the company’s main problem was a drastic decrease in profit in 2015. It is a serious problem for UMW Holding Berhad. To solve the problem, a two-person, zero-sum game approach is introduced. Maximin and minimax strategies for two players are analyzed: UMW Holdings Berhad and its competitor, DRB-HICOM Berhad. We use this approach analytically to determine the best strategy among those entitled to any compensation for excess sales, financial cost and depreciation reduction, and inventory control. LINGO is also applied for reconfirming the game and data analysis. Both analytical and computational approaches generate the same results and outcomes for this game. This is the first time that a two-person, zero-sum game as an analytical approach is applied in Malaysia’s automotive market. Maximin and minimax strategies are also examined in this paper for the first time to find out the best strategy for the two players in the game. This study provides some insights into the hitherto intractable problems in Malaysia’s automotive market. The game theory model developed in this provides strategy choices for the players in Malaysia’s automotive market. Further research along this line is expected.