And services that carry the franchisors brand name

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and services that carry the franchisor’s brand name Equity alliances: partnership in which at least one partner takes partial ownership in the other partner. Give an inside look of the company Joint ventures Parent-subsidiary relationship Vertical integration (Chapter 8.3) o The firm’s ownership of its production of needed inputs or of the channels by which it distributes its outputs. o Types of vertical integration Backward vertical integration : moving ownership of activities upstream to the originating inputs of the value chain Forward vertical integration : moving ownership of activities closer to the end customer o Benefits and risks Benefits: lowering costs, improving quality, facilitating scheduling and planning, facilitating investments in specialized assets, securing critical supplies and distribution channels Risks: increasing costs, reducing quality, reducing flexibility, increasing the potential for legal repercussions o Specialized assets : unique assets with high opportunity cost, they have significantly more value in their intended use than in their next-best use. They come in three types: site specificity, physical-asset specificity, and human-asset specificity
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o Asset specificity o Alternatives to vertical integration: taper integration and strategic outsourcing Taper integration : a way of orchestrating value activities in which a firm is backwardly integrated but also relies on outside-market firms for some of its supplies and/or is forwardly integrated but also relies on outside-market firms for some of its distribution Increase competition, enhance flexibility, combine internal & external knowledge Strategic outsourcing : moving one or more internal value chain activities outside the firm’s boundaries to other firms in the industry value chain Corporate diversification (Chapter 8.4) o Increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes Product diversification Geographic diversification Product-market diversification: active in several different product markets and several different countries o Types of corporate diversification Single business : >95% of revenue Dominant business : between 70% and 95% Related diversification : <70%, other lines of business that are linked to the primary business activity Related-constrained diversification : pursue only businesses where they can apply existed resources and core competencies Related-linked diversification : pursue various business opportunities Unrelated diversification : the conglomerate: <70%, but few linkages among its businesses o Leveraging core competencies for corporate diversification Core competency-market matrix Building new core competency to protect and extend existing markets Building new core competency to create and compete in new markets Leveraging: existing core competency to improve existing markets
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  • Spring '11
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