BUS 800 Chapter Notes - Chapter 7: Vertical Integration, Invisible Hand, Transaction Cost
Document Summary
Product scope how specialized the firm is in terms of the range of products it supplies. Vertical scope range of vertically linked activities the firm encompasses. Geographical scope geographical spread of activities. Corporate strategic decisions encompass both the breadth of the firms product range (product scope) and the extent of its involvement in the industry value chain (vertical scope) Vertical integration used to be seen as an advantage to improving coordination and reducing risks. Now the trend is to outsource and reintegrate. 3 concepts that are key to analyzing corporate strategic decisions and shifts in the scope of the firms activities over time: economies of scope, transaction costs, costs of corporate complexity. Economies of scale reductions in avg costs that result from an increase in the output of a single product. Economies of scope cost economies from increasing the output of multiple products. Use resources across multiple activities (more efficient than independent use)