Corporate Strategy

Question 1

What’s 3 dimensions of corporate strategy

Answer 1

vertical integration
horizontal integration(business/product diversification) 
geographical expanson

Question 2

What are the benefits of diversification?

Answer 2

ECONOMIES OF SCOPE

   - cost synergies  (centralization of procurement, joint distribution, combining sales force)
   - revenue synergies(bundling, one stop shopping, volumes increases due to cross-sellling)

MARKET POWER
vertically integrating can increase market power
increasing MMC and lowering rivalry can help in this

FINANCIAL ECONOMIES (unrelated diversification)

Question 3

What are the downsides of diversification?

Answer 3

• coordination cost

- distracting from core business or most promising business(resources, time, attention)

Question 4

What are the objectives of transaction cost theory?

Answer 4

helps managers decide which activities to perform in house

helps managers to decide which products and services to obtain from the external market

helps determine what the best governance mode is

Question 5

Which two ways are There. “governance mechanisms” to organize economic transactions?

Answer 5

o Markets: Individuals are guided by market prices and make independent
decisions to buy and sell goods. Transactions between firms
o Hierarchies: Transactions among parties occur under a unified owner, who
settles disputes by administrative fiat/control (e.g. employment contracts)
Transactions within a firm
o The relative cost of both mechanisms determines whether a transaction is best
done internally (within the scope of the firm) or with an external party (outside
the scope of the firm (i.e. in the market)

Question 6

What are assumptions in TT?

Answer 6

Bounded rationality- Utility-maximizing, intendedly rational actors areconstrained by cognitive limits on their capacities to process information

Opportunism: “Self-interest with guile” could induce strategic behavior by
partner/counterpart to lie to, cheat, confuse, mislead their exchange partners

Question 7

What are dimensions/charcateristics of transactions?

Answer 7

U F A A
uncertainty aout nevironemnt about actos
frequency of exchanges
assets spicifity
appropiability of knowledge

uncertainty exacerbates the effect of assets specificity

Question 8

What are the benefits of VI?

Answer 8

Less costs (now always)
control over quality
secures distribution channels
offset or limit bargaining power of suppliers

Question 9

risk of vi

Answer 9

more costs
less quality
inhouse suppliers might be less efficient
reducing flexibility regarding demand technology (not system wide)

Question 10

benefits of outsourcing

Answer 10

increased flexilbility
less dependt on bargaining power of suppliers and easy to get rid of them
allows to focus on core value

Question 11

risks of outsourcing

Answer 11

reputation
contract enforcabilitiy migh be an issue
hold up situation In case of bargain power f supplier

Question 12

How can a firm reinvent and expand its resource portfolio to make the most of the opportunities….

Answer 12

BUILD BORROW BUY

Question 13

What challenges arise when you want to expand your portfolio?

Answer 13

• reconigze resource gaps
• chosing the right path to obtain resources
• implementing the chosen path

Question 14

When is build appriaprte?

Answer 14

when the resource the firm already has are closely related to the firms needs, and are superior to the ones competitors have

Question 15

What factors lead to excisse building?

Answer 15

HUBRIS- overestimate inhouse skills vs those in compeititon

MISALIGNMENT OF STAKEHOLDERS (marketing vs sales )
FAILURE OF CONSIDERING EXTERNAL ENVIRONEMNT
LACK OF EXTERNAL SOURCING AND EXPLOITATIOn

Question 16

When should one incurr in basic contracts?

Answer 16

-RESOURCES ARE TRADEABLE
-RESOURES VALUE CAN BE PROTECTED
LEAKEGE CAN BE AVOIDADED

Question 17

What are some factors leading to reluctance to borrow?

Answer 17

wanting a shortcut
obsessing over control
overstimating frictions
misenterpreting prior failures

Question 18

when one should incurr in an alliance?

Answer 18

simples patterns of coordination
symmetrical learning opportunities
balanced resource contribution
low competitive overlap

Question 19

What could lead to reluctance to incur in an Alliance

Answer 19

reluctance to :
share the payoff
share control

Question 20

when should one incurr in acquisitions

Answer 20

when wants + control than in alliance

more access to resources than an arm’s length transaction

Question 21

what is tnegration (buy) acquisiyionfeasible?

Answer 21

Scope of resource combination required
▪ Exploitative acquisitions
▪ Extension acquisitions
▪ Exploratory acquisitions
o Scope of (unneeded) resource divestiture
o Timeline of integration process
o Retaining and keeping employees motivated
o Sufficient M&A execution skills

Question 22

BENEFITS AND RISK OF AN ACQUISITION

Answer 22

MAO