Acquisitions - ANS-Either friendly or hostile takeovers
core competencies - ANS-unique strengths, embedded deep within a firm, that are critical to gaining and
sustaining competitive advantage
economies of scale - ANS-the average costs of per unit fall as the output increases
Economies of scope - ANS-savings that come from producing two (or more) outputs at less cost than
producing each output individually, despite using the same resources and technology
Transaction costs - ANS-All internal & external costs associated with an economic exchange whether
within a firm or in markets
External transaction costs - ANS-costs of searching for a firm or an individual with whom to contract, and
then negotiating, monitoring, and enforcing the contract
internal transaction costs - ANS-costs pertaining to organizing an economic exchange within a hierarchy;
also called administrative costs
Benefits of vertical integration - ANS-Lower cost, improve quality, facilitating scheduling & planning,
facilitating investments in specialized assets: co-located assets, unique equipment, human capital;
securing critical supplies & distribution channels
Risk of vertical integration - ANS-Increasing costs, reducing quailing, reducing flexibility, increasing the
potential for legal repercussions
Alternatives for vertical integration - ANS-Taper integration, and strategic outsourcing
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