CM (Fach) / Topic 8 Vertical Integration (Lektion)
In dieser Lektion befinden sich 13 Karteikarten
Channel
Diese Lektion wurde von Spellex erstellt.
- Name the Nature of vertical Integration Product scope Geographical scope Vertical scope
- Definition and measurement of Vertical Integration "Vertical integration refers to a firm's ownership and control in the vertical value chain. The greater a firm's ownership and control over successive stages of the value chain for its product, the greater its degree of vertical integration." Measured as ratio : Firms value added(Sales revenue - procurement costs) / Sales revenue
- Name the 4 types of Vertical integration 1a) Backward (upstream) integration Getting control over inputs to current activity 1b) Forward (downstream) integration Getting control over access to next-level customers 2a) Full integration Internal production at stage A is only supplied internally Internal demand at stage b is only sourced internally 2b) Partial integration Stages A and/or B are internally not self-sufficient or self-contained
- Name 4 strategic reasons to vertically integrate! Foreclosing of input and output markets to competitors (or reducing the number of customers/suppliers available to them) Cross-subsidization of one stage of the value chain by another "squeeze out" more focused competitors Increasing the barriers to entry, thus reducing the threat of potential entrants Retaining control over proprietary knowledge so as to prevent suppliers/customers from becoming competitors
- Name 6 reasons not to vertical integrate! Performance risk in turbulent environments, characterized by technological volatility and uncertain demand. VI might represent premature commitment that could represent exit barrier Loss of market incentives drives internal costs up Loss of economies of scale (of specialized 3rd party) that cannot be realized internally Previous customers/suppliers might become competitors Bureaucratiziation Loss of focus
- What are Transaction Costs? Transaction costs are the costs of running and governing exchange, including those associated with assembling information and enforcing policy.
- Name the 4 types of Transaction costs Ex Ante : 1.Motivation costs Customer search cost Advertising cost Sales force cost 2.Contracting costs Request for Proposals and bidding Negotiations Contracting Financing Ex-Post : 1. Coordination costs Logistics Inventory Account Management Quality Control Legal Enforcement 2. Adaptation costs Adaptations of terms and conditions
- Name 3 sources of internal uncertainty of a partner Hidden characteristics Hidden intentions Hidden action
- What is transaction cost theory? Management of uncertainty around economic transactions divided into two categories : External uncertainty : Changes in market and environmental conditions Intenal uncertainty of partner : opportunism--> evaluations of intent, behaviour, and performance is difficult Also : greater level of integration under conditions of relationship-specific investments, frequency of type of exchange and uncertainty of interaction.
- What is opportunism? Opportunism = "self-interest seeking with guile" "Humans are only weakly moral" two kinds of opportunism: 1. Active opportunism (blatant or strong form) e.g. strategic manipulation of information, misrepresentation of intentions, false or empty threats or promises, cheating 2. Passive opportunism e.g. withholding of information, evasion of obligations, shirking
- Name reasons to use market distribution! Motivation Specialization Survival of the economically fittest Economies of scale Heavier market coverage Independence from any single manufacturer
- Name reasons to verticalise distributions! Reduce impact of : Specificity - Idiosyncratic (eigene) knowledge - Relationships - Brand equity that derives from channel partner's activities - Customized physical facilities - Dedicated capacity - Site specificity Rarity - Dealing with thin markets Internal uncertainty Performance ambiguity - No baseline, innaccurate, or late metrics.
- Name 4 contemporary VI strategies! Value migration (downstream) Commoditization (Kommerzialisierung) of products Customers demand integrated solutions Get end customer access