ADMS 4900 Chapter Notes - Chapter 6: Vertical Integration, Transaction Cost, Market Power

• School: York University
• Department: Administrative Studies
• Course: ADMS 4900
• Professor: Kelly Thomson

Document Summary

Diversification can happen through mergers and acquisitions, strategic alliances/joint ventures, internal development. Achieving synergy: diversify into related businesses sharing of tangible and intangible resources increasing dominance in a market vertical integration, diversify into unrelated businesses value created from corporate office. Benefits of each are not mutually exclusive. Related diversification: economies of scope and revenue enhancement. Economies of scope cost savings from leveraging core competencies, sharing resources, sharing related activities among businesses within corporation. Is the glue that binds existing businesses together or the engine that drives business growth. Collective learning in organization (how to coordinate diverse production skills, integrate many streams of technologies) Share value creating activities manufacturing facilities, distribution channels, sales force. ~ arises due to elimination of jobs, facilities and related expense that are no longer required when two functions come together. ~ highest when one company acquires another in same industry in same country. ~ added cost of coordination: enhancing revenue and differentiation.