Final Exam Flashcards
Two Business Strategies
- Low cost –> economies of scale, standardization, functional
- Differentiation –> customization, adaptation, decentralized
Four Organizational Structures
Simple
Functional
Divisional
Matrix
Pros/Cons of Functional Structure
+Efficiency
+consolidation, control
-difficult to establish uniform standards of performance
Pros/Cons of Divisional Structure
+Effectiveness
-Duplication of activities
Pros/Cons of Matrix Structure
+Efficient utilization of resources
+Improved communication, flexibility
-Confusion of leadership, conflicts of power
Cost-Adaption Framework: Low cost, Low Adaption
International Strategy
Cost-Adaption Framework: High cost, Low Adaption
Global Strategy
Cost-Adaption Framework: Low cost, High Adaption
Multi-domestic Strategy
Cost-Adaption Framework: High cost, High Adaption
Transnational
Four Reasons to Outsource
- Reduce costs
- Access supplier core competency
- Focus on high value-add activities
- Flexibility
Two ways to reduce costs when outsourcing
- Lower cost structure (wages)
2. Supplier economies of scale
Focus on high value add activities (2)
- Smile curve
2. Economic profit vs. accounting profit, opportunity cots
Four Transaction Costs
- Search
- Negotiation
- Monitoring
- Enforcement
Seven Administrative Costs
- Differences in optimal scale
- Developing distinct competencies
- Managing Strategically different businesses
- Incentive problem
- Competitive affects of VI (HTC)
- Compounding risk
- Flexibility
Why Vertically Integrate? (6)
- Transactions costs > Admin costs
- Create market power, raise barriers to entry
- Market failure
- Counter market power
- Develop a market (new, or there is exiting happening)
- Strategy (Apply in retail)