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SMMCG7[CS1]_Corporate Scope - Coggle Diagram
SMMC
G7
[CS1]_Corporate Scope
Vertical scope
vertical integration terminology
vertical & horizontal integration
vertical
value chain that oriented from bottom to top
horizontal
integrate across business, side-by-side
forward & backward integration
forward
customer orientation
backward
raw material orientation
Motivations
For outsourcing
partner firm is better on building scale/aggregating demand
partner firm is responsive to market/technology trends
lack of resources or capabilities
ex. Coursera
for vertical integration
improve quality, cost
planning, coordinating and controling
market power
entry barrier
upstream/downstream price maintenance
investment in specialized assets
When?
no general prescription
align the "attributes" of transaction with the "governance mode"
ex. PepsiCo
acquire most of its bottlers in 2009
added new stage of activity to its value chain
Transaction Cost Economics (TCE)
Transaction costs
moral hazard
abuse of a benefit
hold up problem
uncertainty and opportunism
adverse selection
Lemon problem
Administrative costs
principal agent problem
performance is unobservable
lack of dynamism
less responsiveness to market or technology trends
weak incentives
Fiat:arrow_right:slack on perform
Make or buy?
Horizontal Scope
Diversification
Diversification discount
When a combined business value is lower than the sum of its SBU's
Example :Gekko Strategy
Forcibly take over those Conglomerates
also getting rid a lot of headquarters staff that doesn't add value
Leveraged buyouts
Motivations
To increase market power
Synergies
Its essential for the economies of scope
They scale common resources and also redeploy slack resources
Reducing Risks
Diversify to reduce the firm's risk or growing the size of the firm
Pursue profitable opportunities
It is optimal to get out new businesses if the opportunities have no relation with other businesses
Reduce competition
BCG matrix
To creat a portfolio of SBUS
Categorized into four types
Question marks
Fast growing market
Yet to establish a strong presence
Stars
Fast growing markets
Strong share
Dogs
Be diverted to raise cash
Cash cows
Typically yesterday star
Strong presence but market aren’t growing as quckily
Redeployment of cash
Corporate strategy
What?
The configuration and coordination of a
company's multi-business activities
Why?
pursue competitive advantage
Corporate scope
Horizontal integration / diversification
What range of products or services
geography scope
where in the world does it compete?
Vertical integration / industry value chain
What stages of the value chain or network is the firm in?
corporate management team would
need to think about.
Managing Integrated Firms
conclusion
more autonomous
more coordinated
interrated firm
pepsi
google
coca cola