Lecture Contemporary strategy analysis: Concepts, techniques, applications (5th edition): Chapter 13 - Robert M. Grant

Bạn đang xem bản rút gọn của tài liệu. Xem và tải ngay bản đầy đủ của tài liệu tại đây (80.74 KB, 7 trang )

(1)<div class='page_container' data-page=1>

Vertical Integration and

The Scope of the Firm

Vertical Integration and

The Scope of the Firm

• Transactions Costs and the Scope of the Firm

--Why does the firm exist?

--The evolution of firms and markets

• The Costs and Benefits of Vertical Integration

• Designing Vertical Relationships

• Recent Trends

</div>
(2)<div class='page_container' data-page=2>

From Business Strategy to Corporate

Strategy: The Scope of the Firm

From Business Strategy to Corporate

Strategy: The Scope of the Firm

• Business Strategy

is concerned with

how

a firm

computes within a particular market

• Corporate Strategy

is concerned with

where

a

firm competes, i.e. the

scope

of its activities

• The dimensions of scope are

–

geographical scope

–

vertical scope

</div>
(3)<div class='page_container' data-page=3>

P1 P2 P3 C1 C2 C3

Vertical

Product

Geographical

Scope

V1
V2

V3 P1 P2 P3 C1 C2 C3
V1

V2
V3

[A] Single

Integrated

Firm

[B] Several

Specialized

Firms linked

by Markets

In situation [A] the business units are integrated within a single firm.

In situation [B] the business units are independent firms linked by markets.
Are the administrative costs of the integrated firm less than the transaction

costs of markets?

Transactions Costs and the

Scope of the Firm

</div>
(4)<div class='page_container' data-page=4>

Transactions Costs and The

Existence of the Firm

Transactions Costs and The

Existence of the Firm

• Transaction cost theory explains not just the

boundaries

of firms

, also the

existence of firms

.

• In 18th century English woollen industry, no firms –

independent spinners and weavers linked by merchants.

• Residential remodeling industry -- mainly independent

employed builders, plumbers, electricians, painters.

• Key issue -- transaction costs of the market vs.

administrative costs of firms.

• Where transaction costs high—firm is more efficient means

of organization

</div>
(5)<div class='page_container' data-page=5>

Changes in Aggregate

Concentration Over Time

• For most of the 19th & 20th centuries industrial firms have expanded their

vertical, geographical and product scope. Why?

• From the late 1970s to the mid-1990s, this trend reversed. Large
 companies began downsizing, outsourcing, and refocusing. Why?

• Why the recent renewal of concentration in the industrial sector?

</div>
(6)<div class='page_container' data-page=6>

Determinants of Changes in Corporate Scope

1800 – 1980

Expanding scale and scope of industrial corporations due to
declining administrative costs of firms:

• Advances in transportation, information and communication
 technologies

• Advances in management—accounting systems, decision sciences, 
 financial techniques, organizational innovations, scientific management

1980 – 1995

Shrinking size and scope of biggest industrial corporations. 
Increasingly Increased no. of managerial Admin. costs of

turbulent decisions. Need for fast firms rise relative 
external responses to external to transaction

environment change costs of markets

1995 – 2004

Rapid increase in global concentration (autos, aluminium, 
oil, beer, banking, cement).

Key drivers: quest for market power and scale economies.

</div>
(7)<div class='page_container' data-page=7>

Lecture Contemporary strategy analysis: Concepts, techniques, applications (5th edition): Chapter 13 - Robert M. Grant

<b>Vertical Integration and </b>

<b>The Scope of the Firm</b>

<b>Vertical Integration and </b>

<b>The Scope of the Firm</b>

•

<b>Transactions Costs and the Scope of the Firm</b>

<b>--Why does the firm exist?</b>

<b>--The evolution of firms and markets</b>

•

<b>The Costs and Benefits of Vertical Integration</b>

•

<b>Designing Vertical Relationships</b>

•

<b>Recent Trends</b>

<b>From Business Strategy to Corporate </b>

<b>Strategy: The Scope of the Firm</b>

<b>From Business Strategy to Corporate </b>

<b>Strategy: The Scope of the Firm</b>

•

<i><b>Business Strategy </b></i>

<b>is concerned with </b>

<i><b>how</b></i>

<b> a firm </b>

<b>computes within a particular market</b>

•

<i><b>Corporate Strategy </b></i>

<b>is concerned with </b>

<i><b>where</b></i>

<b> a </b>

<b>firm competes, i.e. the </b>

<i><b>scope</b></i>

<b> of its activities</b>

•

<b>The dimensions of scope are</b>

–

<b>geographical scope</b>

–

<b>vertical scope</b>

<i><b>Vertical</b></i>

<i><b>Product </b></i>

<i><b>Geographical</b></i>

<i><b>Scope</b></i>

<i><b>Scope</b></i>

<i><b>Scope</b></i>

<i><b>[A] Single </b></i>

<i><b>Integrated</b></i>

<i><b>Firm</b></i>

<i><b>[B] Several</b></i>

<i><b>Specialized </b></i>

<i><b>Firms linked</b></i>

<i><b>by Markets</b></i>

<b>Transactions Costs and the</b>

<b> Scope of the Firm</b>

<b>Transactions Costs and The </b>

<b>Existence of the Firm</b>

<b>Transactions Costs and The </b>

<b>Existence of the Firm</b>

•

<b>Transaction cost theory explains not just the </b>

<i><b>boundaries</b></i>

<i><b> of firms</b></i>

<b>, also the </b>

<i><b>existence of firms</b></i>

<b>.</b>

•

<b>In 18th century English woollen industry, no firms –</b>

<b> independent spinners and weavers linked by merchants.</b>

•

<b>Residential remodeling industry -- mainly independent </b>

<b> employed builders, plumbers, electricians, painters.</b>

•

<b>Key issue -- transaction costs of the market vs. </b>

<b> administrative costs of firms.</b>

•

<b>Where transaction costs high—firm is more efficient means</b>

<b> of organization</b>

<b>Changes in Aggregate </b>

<b>Concentration Over Time</b>

<b>Concentration Over Time</b>