This course is currently not available as a general course – It is presented only for a single company or group of companies.
The Business Strategy / Economics course is a stand-alone course aimed at applying fundamental but advanced economic concepts to developing real world business strategy choices and decision-making. The focus in this course is "from first principles" rather than the formulaic approach that often characterizes “MBA” style of “Business Strategy” courses. The foundation for this course is the understanding that “Capital,” or, “Investing Capital into some Long-term Productive Enterprise”, and capital-intensive industries in particular, have not been areas of much particular study either in business schools or in the economics field, for decades. Thus much of the thinking about issues unique to these industries has not taken place. The course questions some of the very foundations (as currently understood) of rational decision-making for investments, choices that extend over time, and treatment of uncertainty. It also questions the current use of many rules-of-thumb (which are after all just simplified ways of assessing the value of various choices and making decisions). Currently accepted tools for making choices used successfully in other industries can lead to poor outcomes if applied to capital-intensive industries like mining. This is not a course for the faint-hearted of the capital investment world.
Who should attend?
This is a course designed only for Senior Decision-making Personnel (Board Level Managers, Directors, Officers, Analysts)
Course Outline
As with the Advanced Mining Economics Course, prior to commencing the course individual issues will be reviewed with company personnel and a number of case studies will be prepared (or adapted from previous studies) to ensure relevancy to course attendees and company objectives. Areas set out below are a sample of some of the areas that are covered as well as typical issues addressed via case study examples:
What is different about investments in mining and other capital intensive industry compared to other industries and compared to classical economic theory. Economic and “Real” definitions of Risk and Uncertainty. Unresolved issues in the Finance World, and how these unresolved issues apply to capital-intensive industries like mining. “General Equilibrium” and business models that assume general equilibrium, and the limits to applicability of these models. Examination of some common models such as market share / growth models, institutional learning models, and the usability of models designed for consumer markets on industries like mining in the early stages of the structure of production.
Business cycles, booms and busts. The structure of production, commodity cycles and why cycles in the resources sector are harsher and more prolonged than in other sectors of the economy (and what can we do about it)
Economic models of the market economy: the Edgeworth Box or the Prisoners (Producers) Dilemma, and why (or at least, by how much) investments in capital intensive enterprise and the economic structure of the resources industry in particular cannot, or should not, be treated like simple free markets.
Intertemporal Choice, Interest rates, discount rates, and discounted cash flows. What is different about capital investment choices … “Plans” versus “Strategies.” Revisiting Irving Fisher’s 90-year-old model of discounted cash flow as a tool for making capital investment choices. Re-examining marginal revenue and its influence on decision-making with these models. Why new mining investments are almost always made at sub-optimal rates of production, why “Brownfields” mines have low marginal costs of production by actually (usually) result in much lower returns to investment.
Value and Choice under uncertainty. The temporal utility model and other models of choice under uncertainty. Why classical models of choice under uncertainty do not yield very reliable results for the styles of uncertainty in capital intensive industry (and why “real” options are also not worth much!). Rational and not-so-rational investments in Information from a Corporate perspective. “At risk” capital investment analysis – differentiating the probability of loss from the amount of (possible) loss.
Opportunity costs in the context of large project decision-making. Why procrastination is rational (sometimes, at least), and how rational procrastination prolongs downturns. The influence of the Matching Law and the difference between private (proprietary to the company) and external market valuations.