Summary of the economics course Organisation & Strategy, which includes all basic concepts, such as boundaries of a firm and how different strategies can be used to improve a firm's competitiveness.
Test Item File- Practice Test Bank - Economics of Strategy,Besanko,6e
Test Bank to Accompany Economics of Strategy,Besanko,6e
Take Control of Your Studies with the Ultimate [Economics of Strategy,Besanko,6e] Test Bank
All for this textbook (7)
Written for
Erasmus Universiteit Rotterdam (EUR)
Economie en Bedrijfseconomie
Organisation & Strategy
All documents for this subject (10)
Seller
Follow
Luminescence
Reviews received
Content preview
Organisation & Strategy Summary
Contents
Chapter 2: Horizontal Boundaries of a Firm.............................................................................................2
Chapter 3: Vertial Boundaries of the Firm..............................................................................................3
Chapter 4: Integraton and Its Alternaties...............................................................................................5
Chapter 5: Competton............................................................................................................................7
Chapter 6: Entry & Exit.............................................................................................................................9
Chapter 7: Dynamiis – Competng Aiross Time.....................................................................................11
Chapter 8: Porter’s Fiie-Fories Model...................................................................................................12
Chapter 9: Strategii Positoning for Compettie Adiantage..................................................................14
Chapter 11: Sustainable Compettie Adiantage...................................................................................16
Chapter 12: Performanie Measures and Inienties...............................................................................20
Chapter 13: Strategy and Struiture........................................................................................................21
Chapter 14: Eniironment, Power, and Culture.......................................................................................23
,Boundaries of the Firm
- Horizontal: what produits/seriiies does the frm oferr Entry/substtutess
- Vertial: whiih aitiites in-house, whiih outsouriedr Buyer/supplier powers
- Geographiial
Chapter 2: Horizontal Boundaries of a Firm
- Economies of Scale: the produiton proiess for a speiifi good or seriiie exhibits eionomies of
siale oier a range of output when aierage iost per unit of output deilines oier that range.
AC>MCs
o Unit iost reduiton by produiing more at a partcular point in tme.
o U- or L- shaped.
- Economies of Learning: unit iost reduiton by aiiumulatng experienie and know-hows over
tme.i
- Economies of Density: iost saiings arising within a transportaton network due to greater
geographii density of iustomers. Sourie of eionomies of siale.s
- Economies of Scope: iost saiings arising as the iariety of goods and seriiies that a frm
produiess inireases. TC(Qx,Qy) < TC(Qx,0) + TC(0,Qy) E.g. spilloier in logistis/R&D/purihasing.
Eionomies of Siale (p.77) Diseionomies of Siale
- Indiiisibilites iannot be sialed down - Labour iost
below a minimum size, eien if output is - Exhaustng speiialised resouries
iery low; iapital intensiies & spreading of - Organisatonal difiultes.
fxed iosts.
- Inireased produitiity of iariable inputs
e.g. speiialisatons
Diversifcaton: produiing for multple markets.
- Firms are conglomerates if they are iniolied in unrelated diversifcaton limited room for siope
eionomiess.
Reasons for diversification
- Efiieniy-based:
o Siope eionomies: spreading managerial talents.
o Internal capital markets: use reienues from iash-
riih business to fund proftable iniestment
opportunites in iash-ionstrained business see
BCG growth/share matrixs. Alloiaton of aiailable
working iapital within the frm.
- Problemati ustfiatons:
o Diiersifying shareholders’ portolios.
o Identfying underialued frms: unlikely to fnd a genuinely underialued frm.
o Managers looking for growth, eien when unproftable, for personal returns.
Failure in corporate governance: the meihanisms through whiih iorporatons
and their managers are iontrolled by shareholders.
, Chapter 3: Vertical Boundaries of the Firm
Make-or-buy decision: a frm’s deiision to perform an aitiity itself or to purihase it from an
independent frm.
Vertcal foreclosure: integraton to te up
ihannels.
Reasons to buy
- Market frms are more efiient than in-house departments, due to innoiatons and aggregatng
demand eionomies of siales.
- Aioid ageniy iost: iost assoiiated with preientngs shirking. Difiult to udge efiieniy.
o Shirking: managers and workers knowingly aitng against the best interests of their frm.
- Aioid infuenie iost: managers try to infuenie alloiaton of internal iapital market. E.g. lobbying
and iost of bad deiisions.
Reasons to make
- Coordinaton adiantages.
o Timing, sequenie, teihniial speiifiaton, and iolour ft examples p.115s.
o Internal beter than through iontrait of merchant coordinators: independent frms that
speiialise in linking suppliers, manufaiturers, and retailers.
o Design atributes: atributes that need to relate to eaih other in a preiise fashion,
otherwise they lose a signifiant porton of their eionomii ialue examples p.115s.
- Proteiton of priiate ionsumers informaton.
- Aioiding transaiton iost related to relatonship-speiifi assets e.g. tme and iost related to
ireatng a iontrait and opportunisti behaiiours.
o Relatonship-specifc assets: iniestment made to support a speiifi transaiton. It iannot
be redeployed to another transaiton without some sairifie in produitiity or
adaptaton iost. Bilaterally dependent: loiked in the relatonship.
o Quasi-rents
o Holdup problem: trading partner atempts to renegotate terms of a deal in order to
iapture more quasi-rent. A problem that arises when a party in a iontraitual
relatonship exploits the other party’s iulnerability due to relatonship speiifi assets.
More difiult and frequent renegotatons.
Iniestment to improie ex-post bargaining positon e.g. seeking seiond input
souries.
Distrust: harms ioordinaton and willingness to share releiant informaton.
Reduied iniestment: frms might not be willing to iniest a lot in speiifi assets if
they antiipate holdup.
Fundamental transformaton: transformaton in the relatonships between the partes iniolied afer the
iniestment.
- Rent: proft expeited when all goes as planned. Q Pe-Cs-I
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Luminescence. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $4.33. You're not tied to anything after your purchase.
