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WPC 480 Exam 2 with correct Answers
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WPC 480 Exam 2 with correct Answers
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WPC 480 Exam 2 with correct AnswersVertical iiIntegration ii- iiAnswers ii-Deciding iito iimake iisomething iiin iiyour iivalue iichain
ii(meaning iieverything iithat iiit iitakes iito iiget iiyour iiproduct iior iiservice iito iia iiconsumer) iiin
iihouse iiinstead iiof iioutsourcing iiit iior iibuying iiit iion iiin iithe iimarket
Forward iiIntegration- iiDeciding iito iimake iisomething iiin iithe iivalue iichain iithat iiis iimoving
iiin iithe iidirection iiof iithe iicustomer. iiEx: iiCoke iibuying iibottlers ii
Backward iiIntegration: iiDeciding iito iimake iisomething iiin iithe iivalue iichain iithat iiis
iimoving iiin iithe iiopposite iidirection iiof iithe iicustomer. iiEx: iiHermes iibags iibuying
iicrocodile iifarms.
transaction iicosts ii- iiAnswers ii-Costs iiassociated iiwith iian iieconomic iiexchange
Costs iithat iidon't iihave iianything iito iido iiwith iiproduction iibut iihas iito iido iimore iiwith
iicoordinating. ii(meaning iiwhat iiis iiit iigonna iicost iifor iius iito iimake iiit iivs. iibuy iiit).
internal iitransaction iicosts ii- iiAnswers ii-1. iiRecruiting iiand iiretaining iiemployees
2. iiPaying iisalaries iiand iibenefits
3. iiSetting iiup iia iishop iifloor
4. iiProviding iioffice iispace iiand iicomputers, iietc.
These iiwould iiall iibe iithe iicosts iiof iiwe iiwould iineed iito iiconsider iiif iiwe're iithinking iiof
iimaking iisomething iiin iihouse iias iiopposed iito iibuying iiit iion iithe iimarket.
external iitransaction iicosts ii- iiAnswers ii-1. iiSearching iifor iia iifirm iior iian iiindividual iito
iicontract iiwith
2. iiBargaining, iinegotiating, iihaggling iicost ii
3. iiMonitoring, iimeasuring, iisupervising, iienforcing iior iipolicing iiperformance
These iiwould iiall iibe iithe iicosts iiof iiwe iiwould iineed iito iiconsider iiif iiwe're iithinking iiof
iibuying iisomething iiin iithe iimarket iias iiopposed iito iimaking iiit iiourselves.
asset iispecificity ii- iiAnswers ii-1. iiUnique iiassets iiwith iihigh iiopportunity iicost: iiThey
iihave iisignificantly iimore iivalue iiin iitheir iiintended iiuse iithan iiin iitheir iinext-best iiuse.
ii(meaning iithey iiare iionly iivaluable iiwhen iithey iiare iiused iias iithey iiwere iisupposed iito).
2. iiSite iispecificity, iiphysical iiasset iispecificity, iihuman iiasset iispecificity
When iiShould iia iiFirm iiMake iiOr iiBuy? ii- iiAnswers ii-When iiyou iican iicreate iimore iivalue
iiby iimaking iiit iithan iibuying iiit iiand iivice iiversa.
, Opportunism ii- iiAnswers ii-(External) iiTransaction iicosts iiarise iiprimarily iias iia iiresult iiof
1. iiOpportunism: iiwillingness iiof iiat iileast iisome iipeople iito iitake iiadvantage iiof iiothers;
iidishonesty. ii(meaning iiwe iidon't iiknow iithe iiindustry iias iiwell iiso iithey iitry iito iisell iius
iitheir iiproduct iifor iia iihigher iiprice iithan iiwhat iiit iireally iiis).
Ex: iidrug iidealers iicharge iipeople iimore iiif iithey iidon't iiknow iihow iimuch iiit iitypically
iicosts._
2. iiThe iithreat iiof iiopportunism iiis iigreatest iiwhen iithere iiis iian iiasset iispecificity iiproblem
ii(i.e., iitransaction-specific iiinvestment).
when iishould iia iifirm iivertically iiintegrate? ii- iiAnswers ii-Threat iiof iiopportunism: iiHigh
iicosts iiof iimarket iiexchange ii(high iitransaction iicost)
When iioperations iiwithin iithe iifirm iiis iimore iiefficient iithan iiusing iimarket iitransaction
When iiflexibility iiis iinot iian iiimportant iiissue
Control iivs. iiFlexibility ii- iiAnswers ii-Vertical iiintegration iigives iiyou iimore iicontrol iibut
iialso iidecreases iiflexibility
Boundaries iiof iithe iifirm ii- iiAnswers ii-Firms iiwill iieither iimake iior iibuy iisomething
iidepending iion iihow iimuch iithe iitransaction iicosts iiare.
Diversification ii- iiAnswers ii-What iirange iiof iiproducts iiand iiservices iishould iithe iifirm
iioffer iiand ii(what iinew iiindustries iishould iithe iifirm iitarget)?
Economies iiof iiScope ii- iiAnswers ii-exist iiin iia iifirm iiwhen iithe iivalue iiof iiproducts iior
iiservices iiit iisells iiincreases iias iia iifunction iiof iithe iinumber iiof iibusinesses iithat iifirm
iioperates iiin. ii(meaning iithe iimore iidifferent iiproducts iiwe iimake iithe iimore iimoney iiwe'll
iimake iiand iithe iimore iicosts iiwe'll iicut iithanks iito iieconomies iiof iiscale) ii
In iithis iidefinition, iiscope iirefers iito iithe iirange iiof iibusinesses iiin iiwhich iia iidiversified
iifirm iioperates. iiEoS iiare iivaluable iibecause iithey iiincrease iirevenues iior iidecrease
iicosts.
Operational iiEconomies iiof iiScope ii- iiAnswers ii-We iican iiachieve iioperational
iieconomies iiof iiscope iiby:
1. iisharing iiactivities: iiWe iican iibecome iimore iiefficient iiby iisharing iiour iibusiness
iiactivities iior iicapabilities iiwith iiour iiother iibusinesses.
For iiexample iiif iiwe iimake iicars iiand iidecide iito iidiversify iiinto iiboats. iiWe iican iishare
iiour iifixed iiassets iior iiR&D iito iihelp iimake iithe iiboat iiengines iibetter iias iiwell iias iithe iicar
iiengines iitogether iiwhich iiwill iilower iiour iicosts. ii
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