WPC 480 Midterm 2 Questions With Complete Solutions
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Course
WPC 480
Institution
WPC 480
WPC 480 Midterm 2 Questions With
Complete Solutions
Boundaries of the firm "why does a firm exist and to what extent should the firm
expand?"
transaction cost economies helps explain and predict boundaries of the firm
helps managers decide
-which activities to perform in house (Internal Co...
WPC 480 Midterm 2 Questions With
Complete Solutions
Boundaries of the firm "why does a firm exist and to what extent should the firm
expand?"
transaction cost economies helps explain and predict boundaries of the firm
helps managers decide
-which activities to perform in house (Internal Cost)
-services and products to obtain from the external market (External Cost)
asset specificity unique assets with high opportunity cost
ex. Auto parts and assembly
Firm vs. Market (make or buy) Firm: more control but less flexibility
Market: more flexibility but less control
, WPC 480 Midterm 2 Questions With
Complete Solutions
Diversification range of products should a firm offer and what geographic markets to
target
Single Business Leverages its competencies
ex. Coca-Cola, Facebook
Dominat Business dominant and minor business share competencies
ex. Harley Davidson
related constrained businesses general share competencies
ex. Nike, ExxonMobil
related linked some businesses share competencies
ex. Amazon, Disney
Unrelated (conglomerate) diversification businesses share few, if any, competencies
ex. Berkshire Hathway--> owns Geico & Duracell
, WPC 480 Midterm 2 Questions With
Complete Solutions
Operational Economies of Scope shared activities and leveraging core competencies
Financial Economies of Scope Internal Capital Markets (info provide more efficient
budgeting)
Restructuring--> executives can restructure the business portfolio
Boston Consulting Group Matrix helps guide portfolio planning
each category warrants a different investment strategy
4 Strategies:
1. Question Mark
2.Dog
3. Cash Cow
4. Star
question mark strategy earning are low/unstable or growing
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