BUS 010 Lecture Notes - Lecture 14: Moe Williams, Invisible Hand, Vertical Integration
Document Summary
Corporate strategic decisions encompass both the breadth of the firm"s product range. The scope of the firm (product scope) and the extent of its involvement in the industry value chain (vertical scope) Firms extend or reduce their scope because they perceive this to be in the organization"s best. Concepts that are key to analyzing corporate strategic decisions and shifts in the scope of interest firms" activities over time: economies of scope, transactions costs; and, the costs of corporate complexity. Cost economies from increasing the output of multiple products. Exist when the use of a resource across multiple activities consumes less of that resource. Economies of scope than when the activities are carried out independently. The greater the fixed costs of tangible resources, the greater the associated economies of scope. Economies of scope also arise from the centralized provision of administrative and support services to the different businesses of the corporation.
