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SMMC G6 [CS-1], G6 group members - Coggle Diagram

- - - - the possibility of creating entry barriers by controlling a key resource.
      - downstream or upstream price maintenance
  - - - change over time because another part of the value chain might be more profitable than the one they're in now.
      - tools
        
        Porter's Five Forces analysis.
        
        competitive advantage
  - - - forward integration
        
        retail
        
        distribution
      - backward integration
        
        primary material supplies
      - outsourcing
        
        Often companies outsource when they don't have the quality of the needed resources or capabilities to handle an activity
  - - - a theory about the scope of the firm (Oliver Williamson)
      - costs of transactions
        
        associated with
        
        negotiating
        
        monitoring
        
        economic exchanges
        
        enforcing contracts
        
        involved by vertical market exchanges or outsourcing
        
        3 key transaction costs
        
        moral hazard
        
        the transaction partner has private information about its performance that is not measurable or contracted for, which leads to abuse
        
        e.g. insurance
        
        adverse selection
        
        arises due to information asymmetries between a firm and its transaction partner
        
        e.eg. used car industry
        
        Hold up problem
        
        a situation where two parties may be able to work most efficiently by cooperating but avoid doing so because of concerns that they may give the other party increased bargaining power and thus reduce their own profits.
        
        e.g. car industry v.s. its components industry
      - administrative costs
        
        associated with
        
        organizing activities in a more hierarchical command
        
        weak incentives
        
        sclerotic response to changing environments
        
        bureaucracy
        
        control fashion
        
        involved by vertical integration
        
        3 key administrative costs
        
        principal-agent problem
        
        Agents and clients have different interests and goals. The agent may damage the interests of the principal and seek to maximize their own interests.
        
        lack of dynamism
        
        Unable to follow changes in the environment
        
        weak incentives
        
        simply means that an eternal unit may be less laser-focused on delivering the very best performance as an external supplier may be
  - - - sought out
        
        efficiencies
        
        control
        
        market power
        
        coordination
    - - outsourcing
      - vertical integration
      - other ways like making it or buying it
- - - - Another company in the exact same industry
    - - Diversification
    - - Corporate conglomerates
  - - - Hotel
      - Training services
      - Insurance
      - Car rentals
      - Telephone
    - - Managing businesses with analyzing the financials
    - - They need more specialized knowledge
      - Conglomerates were not effective in creating value from unrelated businesses.
      - The corporate headquarters staff was getting too bloated
    - - Split into 3 parts – water technology (Xylem), defense
        (Exelis), and engineered parts (“new” ITT)
      - The stock market zoomed up almost 20 percent
        
        Modern financial markets is quite efficient at allocating cash.
        
        Investors felt that the separate companies would be able to do much better by focusing on their respective businesses
  - - - enter related businesses to increase the market power by reducing competition from related products
        
        a chain of pizza restaurants may also operate a Mexican fast food chain as Yum brands does with Pizza Hut and Taco Bell
        
        lower costs by buying supplies in bulk or developing restaurant sites together
      - synergies
        
        scale common resources in multiple businesses
        
        complementarities between businesses
        
        Example:Yum brands, NIKE&Under Amour, Amazon
        
        Past:example of scaling
        
        Nowadays:specialized, only apply to a limited set of businesses
        
        Develop slack resources and redeploy to other businesses
        
        allocation of cash between SBUs in a conglomerate is an example of such redeployment
    - - does the combination of businesses create value?
      - do we need a hierarchy organized within a single company to achieve the synergies or can we do it better with a market like arrangement?
    - - Value of the diversified firm is less than the sum of its SBUs
  - - - a corporation needs to be active in different businesses, that are at various stages of their industry life-cycle.
      - vertical axis: market growth
        
        market or industry attractiveness
      - horizontal axis: market share
        
        company's strength
    - - map on the BCG matrix are the company's businesses, whose needs and performance will evolve over time
    - - create a portfolio of SBUs, that is well-balanced between current and future success, and between resource availability and resource needs
    - - key source
        
        a set of management tools
        
        some frameworks from strategy
      - meaning
        
        allow conglomerates to manage businesses professionally, at a time when there was less management knowledge available to other companies
        
        extract more value from the businesses they managed by applying these management tools
    - - the bubbles in this BCG matrix illustrate the business units or SBUs of a company with the larger bubbles representing larger businesses by revenue
      - These SBUs are then categorized into four types,based on where they are in the matrix
        
        dogs
        
        businesses that are neither in growing industries nor an area of strength for the company
        
        the expectation was that these businesses would be divested to raise cash
        
        question marks
        
        SBUs with fast-growing markets, and strong market share
        
        These businesses are the future of the company which it should be investing in
        
        stars
        
        Businesses in which the company has a strong presence but in markets that aren't growing as quickly
        
        there's less need to invest in these businesses and they will likely be yielding excess cash due to the company strong position and that cash can be redeployed elsewhere
        
        cash cows
        
        there are the question marks, which are in fast-growing markets, but where the company is yet to establish a strong presence
        
        the company has to make a choice
        
        invest and strengthen its position by investing more cash
        
        give up and divest the business
      - emphasize the redeployment of cash, from businesses that had too much of it to others that needed it
    - - either divest businesses or invest in fast-growing ones in order to build strong positions in them
- - - - diversification
      - What range of products or services?
    - - global strategy
      - Where in the world does it compete?
    - - industry value chain
      - What stage is the value chain or network is the Firm in?
    - - the overall footprint of the company