Chapter 9 Flashcards
What are some benefits of horizontal integration?
Low cost structure, increase product differentiation, leveraging competitive advantage more broadly, reduced industry rivalry, and increase bargaining power
What is holdup?
When a company is taken advantage by another company after it has made investment in expensive specialized equipment/asset to better serve that company
What is tapered integraton?
When a firm uses a mix of vertical integration and market transaction for given input. Make some, buy some to reduce holdup
What is transfer pricing?
When a price of a division changes and it affects other division since it’s an input for that division
What is quasi integration?
Use of long term relationship or investment in some activities normally performed by suppliers or buyers in place of ownership of operations
What is hostage taking?
Exchanging valuable resources to guarantee that both side will keep the agreement
What is a credible commitment?
Believable promise or pledge to support long term relationship between companies
What is a parallel sourcing policy?
Policy in which a company enters into long-term contracts with two or more suppliers for the same component to prevent opportunism
What is strategic outsourcing?
Decision to allow one or more company’s value chain activities to be performed by independent specialized company
What is virtual corporation?
A company that pursued extensive outsoucing to the point where they only perform the central value creation functions that lead to competitive advantage
