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[CS-1] Corporate Scope, Group2 Team members - Coggle Diagram

- - - - "market arrangements" as alternatives to integration
      - De-link the objective from the organizational form that best achieves
      - advantage
        
        firm
        
        Command and control
        
        Coordination
        
        Community of knowledge
        
        markets
        
        High-powered incentives
        
        Flexibility
      - disadvantage
        
        firm
        
        Principal-agent problem
        
        Administrative costs
        
        Low-powered incentives
        
        markets
        
        Opportunism
        
        Incomplete contracting
        
        Enforcement of contracts
        
        Administrative costs
        
        Search costs
      - John Deere and Company
        
        the manufacturer of electrical equipment
        
        agriculture and mining industry
        
        Diversify and get rid of cyclical markets
        
        Globalization
        
        Alliance with partners
        
        alternative plan
  - - - synergies
    - - comparative organizational analysis
  - - - firm-specific
    - - Diversified relevance means potential relevance
        
        Company-specific
  - - - create vale from a set of few and more related businesses
  - - - Diversification Discount
        
        value of a diversified firms is less than its SBUs
    - - enter related businesses
        
        Synergies
        
        Scale common resources
        
        used in multiple businesses
        
        Amazon
        
        various kinds of products
        
        Nike & Under Amour
        
        redeploy slack resources
        
        specialized resources that are unique to the firm
        
        Uber
        
        Reduce risks
        
        Market power
        
        reducing competition
        
        Pursue profitable opportunities
- - - - Merging with another company in the exact same industry, so it can increase the size of the company
  - - - Through the movie Wall Street
        
        Buy up conglomerate and break them up
        
        Gordon Gekko is a hard charging corporate raider
        
        Greed being good
  - - - Advantages
        
        Have opportunity to connect with faculty and college across the campus
        
        You can learn from other departments,and then take those ideas and bring them into your teaching or your research
        
        Have a bigger population
        
        Studients from different backgrounds, different cultures, and also different majors
        
        You can to double major in other department
        
        They're all very strong programs with great research opportunities
      - Disadvantage
        
        The students can feel as though they maybe are not as special as other people or they get lost in the large pool
    - - Advantage
        
        Clarity of focus
        
        Easy to get everyone working in the same direction
      - Disadvantage
        
        Can't have the great synergies with with faculty and college across the campus
- - - - Delink the benefits sought through integration from the governance mode
      - Conduct a dispassionate, comparative, organizational analysis
        
        Identify whether integration or diversification makes sense relative to market-based alternatives
  - - - units would be managed with some degree of autonomy
        
        Google see Waymo as a independent subsidiary
        
        coordinated approaches seek to reduce transaction costs through more hierarchical organization
        
        The best approach depends largely on the nature of synergies
    - - develop an online grocery business:Whole Foods Market
        
        integration of Amazon's IT systems
- - - - Market or industry attractiveness
    - - Company's strength
    - - Current success
        
        Balance
      - Future success
      - Resource availability
      - Resource needs
        
        Balance
  - - - :red_cross: Establish a strong presence
        :check: In fast-growing markets
      - :question: Invest & Strengthen its position
        :question: Give up & Divest the business
    - - Fast-growing markets & Strong market share
      - Invest :arrow_up:
    - - :red_cross: Growing industries & Strength area
      - Divested to raise cash
    - - :check: Strong presence
        :red_cross: In fast-growing markets
      - Invest :arrow_down:
        Yielding excess cash :arrow_right: redeployed elsewhere
  - - - Insurance: Hartford
      - Hotels: Sheraton
        
        All these businesses were the same
      - Car rentals: Evans rental car
    - - Conglomerates weren't effective in creating value from unrelated businesses
      - Corporate headquarters staff wasn't adding value to manage these businesses
      - Hotels was different business than insurance, telecom or engineered products
    - - Two modes for ITT's businesses or SBUs to operate
        
        As one company, with internal cash transfers from Cash cows :arrow_right: Stars
        
        Diversified firms have bureaucratic inefficiencies
        
        As separate companies, using financial markets for investing and raising cash
        
        Financial markets allocate cash more efficient
      - Separate companies would be able to do better by focusing on their respective businesses
      - Split into three parts
        
        Water business: Xylem
        
        Defense business: Exelis
        
        Cash cows
        
        Engineered parts: (New) ITT
        
        Star SBUs
- - - - Vertically integrate
      - Horizontal scope
    - - Economic exchange
      - Administrative cost
        
        Hierarchical organization within a single company
        
        Source
        
        principal-agent problem
        
        Applied in
        
        Owner/manager context
        
        Manager subordinate context
        
        weak incentives
      - Transaction cost (holdup problem)
        
        Market exchange
        
        Three major sources need to worry
        
        Moral hazard
        
        Holdup problem
        
        Adverse selection
        
        Outsourcing
  - - - Adverse selection
        
        Arises due to information asymmetries
        
        Market for Lemon paper
        
        Example
        
        Used car market
        
        Moral hazard
  - - - Abuse relation between supplier
        
        For example
        
        Get supplier to buy customized machinery
        
        Lead to
        
        The long-run consequences and reputational effects
      - Transaction hazards
        
        For example
        
        Exposing company's core knowledge, or technology to supplier
        
        Lead to
        
        Pass that knowledge to competitor
  - - - Difficult to measure the performance of the partner
      - Need strong incentives for performance
      - There are technology leakage hazard
        
        Use vertically integrate
      - More adaptation over time to market trends
        
        Use outsourcing
      - Needs investment in specific assets
      - More adaptation over time to technology trends