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SMMCG8[CS-1] Corporate Scope, G8 Group member - Coggle Diagram
SMMC
G8
[CS-1] Corporate Scope
Horizontal Scope
BCG matrix/ BCGGE matrix
main idea
a conglomerate needs to be active in different businesses
unit
Strategic Business Units
key resources of value
a set of management tool
ex. based on accounting and financial analysis
redeployment between a company's businesses
four categories
star
fast-growing markets, and strong market share
be invested
cash cow
yesterday stars but markets aren't growing quickly any more
less be invested and will be redeployed
dog
means neither growing industries nor an area of strength for the company
be divested to raise cash
question mark
fast-growing markets, but yet has a strong presence.
make decision
a business will not always stay in one category
three aspects
cash flow
percentage
market growth
Diversification opportunities
method
synergies
operating in more than one business at the same time
scale common resources in multiple businesses
complementarities
buying supplies together to lower costs.
Two types of synergies
more specialized
develop slack resources and redeploy
continue or give up
diversification may pursue profitable opportunities
if no relation,spin out early
conclusion
the implications for diversification summarized in the form of two key tests
the better off test
ownership test
diversification better than market alternatives
highly firm-specific
not available in the market
only be done inside a company
significance
forcibly take over and create value by breaking them up into parts
required to be top in their industry or be divested.
Examples：GE
the best performance is associated with firms
conspectus
diversification
example
the modern and multi-specialty university
a clarity of focus
to get everyone working in the same direction
faculty will often be asked to engage in other activities for the good of the campus
synergies
learn from others
take those ideas and bring them into your ideas
diverse perspectives
people from different backgrounds, different cultures, and also different majors
share resources with others
horizontal mergers
merging with another company in the exact same industry
increasing the size of the company in the same business
horizontal scope
the firm's footprint across a set of different, not the same business
the firm's diversification
related and unrelated diversification
conglomerates
Introduction
corporate scope
horizontal integration
What range of products and services?
geographic scope
Where in the world to compete?
vertical integration
What stages of value chain (or network)?
Managing Integrated Firms
Step
First
dealing the benefits sought through integration from the governance mode used to achieve those benefits
Second
conduct a dispassionate comparative organizational analysis to identify whether integration or diversification makes sense relative to market-based alternatives.
Examples
Coca-Cola & PepsiCo
owned their bottlers or not
Coca-Cola
some features of the bottling operation that can benefit from a market type arrangement working with independent bottlers
to have independent bottlers who are incentivized to and also inherently do understand their local markets and business conditions well.
PepsiCo
vertically integrate
has more control over the overall quality of service that retailers and consumers receive from bottlers
to ensure that new technology or marketing investments are made
Conclusion
the approach companies take to diversification can vary
from more autonomous to more coordinated approaches
Vertical Scope
Vertical Intergration
Which parts of the value chain or the value network should a company operate in?
change over time
another part of the value chain might be more profitable
For example：started in retailing or distribution, and then decided to go into manufacturing the product and stop being a retailer or distributor
Should the same company be integrated across specific stages of the value chain (or network)?
forward integration
get closer to the customer
backward integration
get closer to the raw materials
outsource
to learn from their outsourcing partners to develop their own capabilities
better able to aggregate demand and build scale
For example：Coursera
Transaction Cost
transaction cost economics
weak incentives and sclerotic response to changing environments
market exchanges or outsourcing
transaction costs
vertical integration
administrative costs
economic exchanges
separate from the optimal organizational form
jump from the first stage to the conclusion that a particular organizational form is needed
All organizational forms are flawed
make or buy are different in terms of the relative advantages or disadvantages
compare and decide balance
using markets or outsourcing provides better adaptation
higher transaction costs in markets
higher administrative costs within firms
transaction costs in markets
search costs and haggling costs
some strategic costs
adverse selection
information asymmetries
moral hazard
the hold-up problem
opportunism
weak incentives
continuity
governed by fiat
principal-agent problem
lack of dynamism
less responsiveness to market or technology trends
G8 Group member
外文四 楊芯樺 Katherine
國企四 鄭淳芬 Ruby
外文四 蕭 逸 Sophia
國企三 陳宜萱 Cindy
國企三 尹薔雰 Rose
中文四 鄭淳芳 Angel