Lecture 3 Flashcards
What are the make or buy decisions?
Where a firm decides whether to outsource parts/skills for their product or do it in house
When should a company outsource?
When things are outside the firms scope or it is more efficient (can be financialy) to have other party do a process for them
What is TCE?
Transaction costs economics where the focus is on minimizing direct costs and opportunity cost (costs from making wrong decisions)
What are the assumptions that are made using TCE?
Two assumption for human behavior, first that we are bound to our rationality and limited knowledge and second that we humans are most times opportunistic
What are the dimensions in TCE?
There is asset specificity that is the degree to which a thing of value, or even a person of value, can be readily adapted for other purposes
There is uncertainty that can be in the environment of the firm and/or behavior
What are the criticism of TCE?
It does not address the firm limitations
Focuses only on minimizing costs and not adding value
Focus on contractual issues and not on relations after the contract
What is a part of the capability approach?
Resource based view
What does RBV entails?
Sees resources as a mean to gain competitive advantage
How does RBV see ‘r’ are?
That resources should be in-imitable, rare, valuable, immobile and non substitutable VRIIN
What does the first ‘i’ in VRIIN entail?
In-imitable, where the resource cannot be obtained by another firm
Can be due to a unique historical condition, causal ambiguity and/or due to social complexity
What does the ‘n’ in VRIIN entail?
Non substitutable, where resources should be resistant to substitution as otherwise the firm’s competitive advantage wont be sustained
What does the second ‘i’ in VRIIN entail?
the a resource should be immobile and not to be traded between firms as to not decrease a firm’s value ex: quality reputation, loyalty and innovations
What are the criticisms towards RBV?
That it excludes possibility of opportunism, does not focus on costs
What is RfQ?
Request for Quotation: is a document issued when an organization wishes to procure a product/item and makes specifications of it available to other firms for competitive bid
What is RfP?
Request for Proposal: a document issued when a firm wishes to procure an item but need complete or partial design input from the supplier
What is RfI?
Request for information: document issued when a firm wishes to collect more information regarding a product or supplier
What are technical requirements?
Are very detailed description of properties, what the product has (car makes a specific sound when there is a specific problem)
What are functional requirement?
Are requirements that tell what the product should do no mattering how
(product ust be able to hold a can, doesn’t matter the design)
Which requirement does the risk lie with the buyer?
technical requirement
Which requirement does the risk lie with the supplier?
functional requirement
What is TCO?
Total cost of ownership
What does TCO entail?
the total costs, direct and indirect of making/producing a product
What are some pitfalls in specification?
there can be too much emphasis on the technical requirements, some parts can be forgotten
What is variable sum?
when negotiating there are multiple issues and end in win-win
