Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
13 Cards in this Set
- Front
- Back
|
Corporate level strategy: |
decisions that senior management make and theactions it takes in the quest for competitive advantage in severalindustries and markets simultaneously; where to compete |
|
|
Transaction Costs: |
costs associated with economic change Ex: inside the firm: admin costs, outside thefirm: finding someone to buy the product |
|
|
Vertical- Firm Activities Advantages/Disadvantages |
Advantages: command and control,coordination, community of knowledge Disadvantages: low-powered incentives,principal-agent problems, administrative costs |
|
|
Horizontal- Market Activities Advan/Disadvan |
Advantages: high powered incentives,flexibility
Disadvantage: search costs (BIGGESTDISADVANTAGE), opportunism (self interest with deceit), incomplete contracting(specifying and measuring performance, information asymmetries- one party ismore informed than another), enforcement of contracts |
|
|
Vertical Integration |
what will weproduce in our value chain Can be measured by the firms added value What percentage of sales in generated in house? |
|
|
Stages ofthe Value Chain |
1. Raw Materials 2. Components, Intermediate goods 3. Final Assembly, manufacturing 4. Marketing, Sales 5. After sales service and support |
|
|
Backward Vertical Integration: |
Moving towards the lower numbers in the stagesof value chain |
|
|
Upstream industries: |
focus on the first few stages of the value chain(raw materials, components or intermediate goods) |
|
|
Forward Vertical Integration: |
Moving towards the higher numbers in the stagesof the value chain |
|
|
Downstream industries: |
focus on the later stages of the value chain(eg. Sales and marketing or after sales service and support) |
|
|
Benefitsof Vertical Integration |
· Securing critical supplies · Lowering Costs · Improving quality · Facilitating scheduling and planning · Facilitating investment in specialized assets o Site specificityo Physical-asset specificity o Human asset specificity o Incur high opportunity costs – open up thethreat of opportunism (self-interest with deceit) |
|
|
· Risks ofVertical Integration |
· Increasing costs · Reducing quality · Reducing flexibility · Increasing the potential for legal repercussions |
|
|
o Alternativesto Vertical Integration |
Taper integration: orchestrating valueactivities in which a firm is backwardly integrated but also relies on outsidemarket firm for some of its supplies, and/or is forwardly integrated but alsorelies on outside market firm for some of it’s distribution Strategic outsourcing: moving 1 or moreinternal value chain activities outside the firm to the industry value chain |
