To login with Google, please enable popups
Forgot your password?
Don’t have an account? Sign up
To signup with Google, please enable popups
Sign up with Google or Facebook
To sign up you must be 13 or older. Other people won’t see your birthday.
By signing up I agree to StudyBlue's
Already have an account? Log in
A firm's valuable and rare vertical integration choices may be subject to direct duplication and substitutes.
work with Tom in an open and participative process to develop the budget based on the economic reality facing Tom’s function and use both quantitative and qualitative evaluations of the performance of Tom’s function.
the process used in developing budgets is open and participative.
firms to reduce their level of vertical integration by outsourcing functions that used to be within their boundaries to independent foreign operations.
Integration tends to be less costly and risky than other international strategies such as exporting, licensing or joint ventures.
Digipic is an assembler of digital cameras. As an assembler, Digipic's operations are limited to purchasing all of the components necessary to assemble the cameras and then selling these cameras to wholesalers who, in turn, sell them through online stores and in retail electronics stores.
TerraLoc competes in the market for global positioning devices and services. The company manufacturers its own GPS units that are smaller than those of any other competitor and include a proprietary battery that lasts 200% longer than any other competitor's battery and that TerraLoc manufacturers on-site. TerraLoc also has developed proprietary software that is much faster and more precise than any competitor. When developing the proprietary battery, TerraLoc decided to manufacturer the battery in-house to reduce the possibility that the company they outsourced the battery manufacturing to might reverse engineer the battery and sell a similar product to competitors. This possibility was especially troubling given that the company expected a significant increase in demand due to the improved battery life. Additionally, TerraLoc sells its products and services through its own direct sales force to ensure that its representatives highlight the longer battery life of Terraloc's units.
increase the rarity of TerraLoc's vertical integration strategy since TerraLoc has reduced uncertainties related to increased battery-life in its products.
determine budgets for her managers and allow them to focus only on meeting the budgets.
there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
economies of scope
Only diversified firms can exploit economies of scope.
substantial organizational issues are often associated with a diversified firm’s learning how to manage cross-business relationships and failure can lead to excess bureaucracy, inefficiency, and organizational gridlock.
the threat of retaliation must be substantial and the firms pursuing this strategy must have strong linkages among their diversified businesses.
not the economic performance of the firm, but the size of the firm, usually measured in sales.
Diversification to maximize the size of a firm
growing and developing independent businesses within a diversified firm and strategic alliances.
If only a few competing firms have exploited a particular economy of scope, that economy of scope can be rare.
Hedging strategies can help reduce financial risks but not political risks.
may limit the ability of a particular business to meet specific customers' needs.
rare and costly-to-duplicate.
may have; relatively rare
using an alliance; learning new skills and capabilities
it is difficult or costly to observe the resources or capabilities that a partner brings to an alliance.
less; more; more
depend not only on the number of competing firms that have already implemented an alliance but also on whether or not the benefits that firms obtain from their alliances are not common across competing firms in the industry.
relatively few firms may have the complementary resources and abilities needed to form an alliance.
the partners’ inability to trust one another.
the level of transaction-specific investments required to complete an exchange is moderate.
Even if one firm is clearly cheating in an alliance, the other firm may not be sufficiently tied into a network of firms to make this information public.
vertical integration in international operations.
eBay the online auction company has an impressive portfolio of cooperative agreements. This portfolio includes an agreement with the U.S. Postal Service to facilitate the shipping of goods purchased through eBay auctions, an agreement to allow MBNA to use eBay's name on a credit card, an agreement in an online auction company in Korea that is supplemented with an investment by eBay in the Korean partner, and at one time eBay had formed an independent firm, called eBay Australia and New Zealand, with an Australian company known as ecorp.
The level of transaction-specific investments required to enter the Korean online auction industry is moderate.