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Economies of scale ai core competencies something

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(economies of scale) a.i. Core competencies – something your firm is particularly good at. The following increase their value a.i.1. It must enhance the competitive advantage a.i.2. Businesses in the corporation must be similar in one material way a.i.3. The core competencies must be difficult to imitate for find substitutes for a.ii. Sharing activities – common factory facilities, distribution channels, and sales forces. There are two payoffs a.ii.1. Deriving cost savings through sharing activities a.ii.2. Larger revenue and differentiation b. Related diversification – market power logic b.i. Pooled negotiating power b.ii. Vertical integration – b.ii.1. Benefits: secure raw materials, new business opportunities and technologies, eliminate need to negotiate
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b.ii.2. Risks: costs result in increased overhead, feel supply shocks more, additional administrative costs b.ii.2.a. Consider: Is the company satisfied with suppliers/distributors, are there activities in the value chain that can be performed for profits, is there high sustained demand for the product, is there excess capacity for production of the material, does the company have the necessary competencies, what are the negatives b.ii.2.b. Transaction cost perspective: Vert int can reduce the search, negotiating, contract, monitoring, and enforcement costs of contracting with outside firms. And reduced transaction-specific investment (making a specific part), which firms usually wont do because they may not be able to recover the cost, and they cant sell it to anyone else. b.ii.2.c. These all must be compared to the additional administrative costs c. Unrelated diversification – synergies created from corporate offices c.i. Parenting and Restructuring c.i.1. Parenting – management expertise c.i.2. Restructuring – purchase failing or unrealized potential company and change strategy, infuse with capital, new technologies, complete overhaul. c.i.2.a. Asset restructuring – sale or purchase of assets c.i.2.b. Capital Restructuring – debt-equity ratio c.i.2.c. Management restructuring – changes in organizational structure, management team, etc c.ii. Portfolio management – allocation of resources (not enough investment) c.ii.1. BCG matrix (cash cows, stars, question marks (high growth/low share), and dogs. Changes goals and rewards c.ii.1.a. This view assumes that there are only two criteria to evaluate firms on and that every unit can be compared in this way. It views each SBU as a stand-alone unit and ignore core competencies. Using strict rules is bad for long- term investment d. Problems with diversification as a risk-reducer d.i. Stockholders can diversify at a cheaper cost d.ii. It may not work e. Methods of diversification e.i. M&A – acquiring is faster than building, consolidate industry, adding resources, leverage comp, share act, and build market power e.i.1. Limits: takeover premium is high, competing firms can imitate and copy realized synergies, managers’ ego can get in the way, cultural issues, e.i.2. Divestment (reverse M&A) – cut your losses, more resources for more attractive investments,
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economies of scale ai Core competencies something your firm...

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