Anticompetitive economies of scope Market Power multipoint competition

Anticompetitive economies of scope market power

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Anticompetitive economies of scope (Market Power) multipoint competition exploiting market power Employee Incentives (Growth Motive) diversifying employees’ risk and improving promotion chances maximizing management compensation Avoid declining industries
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Diversification 9 (1) Sharing Linkages Between Businesses (2) Sharing Core Competence Bus. A Bus. B Bus. C Bus. D Bus. A Bus. B Bus. C Bus. D Core Competence Corporate Advantages from Diversification Corporate Advantages from Diversification
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Diversification 10 Corporate Advantages from Diversification Corporate Advantages from Diversification Market Power Umbrella branding Bundling Cross promotion Willingness to Pay Economies of Scope Shared costs across businesses Shared activities Shared resources Economies of Internalizing Transactions Internal Market System Information Advantages Superior internal resources/transfer mechanisms Cross business learning/knowledge Size based political influence
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Diversification 11 Economies of scope -- cost reduction from achieving minimum scale in an input factor, derived from producing multiple products * tangible assets, e.g., distribution and service networks, R&D * intangible assets, e.g., brand names, corporate reputations, technology Scope Advantages from Diversification Scope Advantages from Diversification * organizational capabilities, e.g., management capabilities, marketing skills
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Diversification 12 Scale Advantages from Diversification Scale Advantages from Diversification Economies of Scale in Administration, Financing and Control = cost advantages from reaching minimum efficient scale in administrative and control activities by centralizing similar activities at the corporate HQ, and by operating an internal capital market * Administration, e.g. centralized strategic planning, centralized legal functions, etc.
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  • Spring '16
  • internal capital market

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