case study questions
WPC 480. Week 10
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Upcoming Assignments
Quiz 5 – Chapter 8 March 26th - Due today
Quiz 6 – Chapter 9 April 2nd
Quiz 7 – Chapter 12 April 9th
SAS Paper #4 – April 16th
Quiz 8 – Chapter 10 April 23rd
Group Analysis Paper – April 23rd
Exec Interview Presentation – April 30th
Final Exam – May 7th Thursday 6 PM to 7:50 PM
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For next week…
Topic: Corporate Strategy: Mergers & Acquisitions…
Textbook Reading: Chapter 9
Quiz #6 over Chapter 9 due April 2nd
Need volunteer for Chapter 9 mini-case presentation on Lyft.
(After tonight – 6 classes till end of semester)
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Growth
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Growth Options
Diversification – Increase in variety
Vertical Integration – Forward or Backward on value chain
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Industry 1
Diversification
Industry 2
Vertical Integration
Diversification
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Related Diversification
Firms create value by building upon or extending:
resources
capabilities
core competencies
Economies of Scope
Cost savings that occur when a firm transfers capabilities and competencies developed in one of its businesses to another of its businesses
Economies of Scope
Operational EoS: Shared activities or leveraging core competencies or transferring skills among units
Financial EoS: Internal capital markets – moving capital between units.
(The only EoS that unrelated diversification can accomplish)
Honda
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Manufacturing Platforms
Innovation Activities
Shared Activities
Lightweight, reliable engines
Realized as Diversification
Stand alone
Marine
Vehicles
Yard Care
Generators
Boats Watercraft
Cars, SUV, Vans
Lawn mowers Snow Blowers
Core Products
Building Core Competencies
Firms can diversify to build new competencies to transform the corporation
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Restructuring
Guide to Structure: Growth/Share Matrix
Different investment strategies
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Firm Performance
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Vertical Intregation
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Growth Options
Diversification – Increase in variety
Vertical Integration – Forward or Backward on value chain
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Industry 1
Diversification
Industry 2
Vertical Integration
Vertical Integration
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Make or Buy?
When firms are more efficient than the market then consider vertical integration
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Transaction Costs
External transaction costs
Searching for a firm or individual with which to contract
Negotiating, monitoring, supervising and enforcing the contract
Internal transaction costs
Recruiting and retaining employees
Paying salaries and benefits
Setting up a shop floor
Providing office space and computers, etc.
Risk of Opportunisum: greatest with asset specificity problems
Make or Buy?
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$4.80 Foods
(Mozzarella Cheese)
Where your pizza comes from
Dairy Farmers
(milk)
Crop Farmers
(Alfalfa & Corn)
Seed Companies
(Alfalfa & Corn)
Food Distributors
Pizza Chains
End Consumer
Value Chain
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$4.80 Foods
(Mozzarella Cheese)
Dairy Farmers
(milk)
Crop Farmers
(Alfalfa & Corn)
Seed Companies
(Alfalfa & Corn)
Food Distributors
Pizza Chains
End Consumer
Backward
Vertical
Integration
Forward
Vertical
Integration
Vertical Integration
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Activity
Determine how diversified your company is per the matrix?
How have they diversified?
Have they vertically integrated? From what starting point and in what direction?
Selected Companies
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Value Creation vs Costs
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