SMG SI 422 Lecture Notes - Lecture 14: Horizontal Integration, Vertical Integration, Fixed Cost
21 Apr 2017
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Reading preparation questions: explai(cid:374) the (cid:862)better off test(cid:863) a(cid:374)d (cid:862)ow(cid:374)ership test(cid:863) i(cid:374) the (cid:272)o(cid:374)text of horizo(cid:374)tal (cid:272)ope. The better off test in the horizontal scope can be seen through economies of scope and cross-selling benefits. With economies of scope, horizontal diversification can generate cost advantages and with cross-selling, it can create willingness-to-pay. Cross selling is like a one stop shop. Assess whether you believe that it has chosen he correct horizontal and vertical scope and explain why, building on the concepts in the reading. Be prepared to present your analysis in class. Economies of scope is when a company can spread their fixed cost over more products, making each product less expensive to make.
