Economics of Strategy Besanko Dranove Shanley and Schaefer
Economics of Strategy Besanko, Dranove, Shanley and Schaefer, 4 th Edition Chapter 3 Vertical Boundaries of the Firm Slide show prepared by Richard Ponarul California State University, Chico John Wiley Sons, Inc.
Vertical Boundaries of the Firm l l l Which steps of the vertical chain are to be performed inside the firm? Which steps of the vertical chain to be outsourced? Choice between the “invisible hand” of the market and the “visible hand” of the organization (Make or Buy: 직접 생산할 것인 가 또는 외부 기업으로부터 구매할 것인가의 선 택문제)
Vertically Integrated Firms In a vertically integrated firm, many of the steps in the vertical chain are performed in-house. Ex. Scott Paper(원목 생산에서부터 최종 종이까지 기업 내부에서 일관된 생산체제) Ex. SK(원유 채굴부터 석유화학 제품까지) l Some firms choose to outsource many of the vertical chain tasks and become vertically disintegrated. Example: Nike, Benetton l
Make versus Buy 직접 생산 vs. 외부 구매의 선택 Decision depends on the costs and benefits of using the market as opposed to performing the task in-house l Outside specialists may perform a task better than the firm can l Intermediate solutions are possible Ex. Strategic alliances with suppliers, Joint ventures⇔내부생산과 시장거래의 중간형태) l
Support Services l l l Accounting Finance Legal Support Marketing Planning Human Resource Management
Support Services l Support services can be major sources of value creation. 특히 선진국 기업일 수록 제조보다는 브랜드, 마케팅, 자금 등 지원서비스에서 높은 부가가치를 얻고 있음 – – – UPS: Logistics Toyota: Human Resource Management Nike: Marketing GE: Finance Harley Davidson: 오토바이 자체보다 오토바이와 함께 라이프 스타일을 파는 기업으로 인식 UPS: 물류관리
Defining Boundaries l l Firms need to define their vertical boundaries Considerations – – Economies of scale achieved by market firms Value of market discipline(시장경쟁으로부터 오는 규율 효과) Ease of coordination of production flows in-house ( 내부생산의 경우 생산단계간 조정이 시장기구보다 효율적일 수 있음) Transactions costs when dealing with market firms
Some Make-or-Buy Fallacies l l l Firm should make rather than buy assets that provide competitive advantages Outsourcing an activity eliminates the cost of that activity Backward integration captures the profit margin of the supplier Backward integration insures against the risk of high input prices It makes sense to tie up the distribution channel in order to deny access to the rivals
Make-or-Buy and Competitive Advantage - Firm should make rather than buy assets that provide competitive advantages l A firm believes that a particular asset is a source of competitive advantage, but it turns out the asset is easily available in the market (특정 자산이 기업의 핵심 경쟁력이라면 시장에서 거래되기 어려울 것임. 만약 시 장에서 쉽게 거래되는 자산이라면 핵심경쟁력 요소로 보기는 어려움) l The belief regarding competitive advantage will have to be reevaluated
Outsourcing and Cost - Outsourcing an activity eliminates the cost of that activity l It should not matter if the costs of performing an activity are incurred by the firm (Make) or by the supplier (Buy) l The relevant consideration is whether it is more efficient to make or to buy
Backward Integration and Profits - Backward integration captures the profit margin of the supplier l If the supplier is earning economic profit, what is the reason for its persistence? l Market competition should eventually erode away the economic profit l 만약 장기적으로 독과점이 유지되고 초과 이윤이 지속 된다면 이는 그 기업이 생산과정에 다른 기업에 비해 경 쟁력을 갖고 있는 결과이고 이 경우 자체적으로 생산할 경우 시장 기업보다 효율적으로 생산한다는 보장이 없 음
Vertical Integration and Input Price Risk - Backward integration insures against the risk of high input prices (계절적 요인이나 공급요인에 따른 가격 상 승으로 인한 위험이 존재할 경우) l Instead of vertical integration, forward or futures contracts can be used to hedge input price risk l Another possibility is that the capital tied up in vertical integration could be used to set up a self insurance fund l Vertical integration into a risky activity will add rather than reduce the overall risk (후방 결합하는 부문이 가격 변동이 심할 경우 그 자체가 위험에 노출되는 결과)
Foreclosure of Distribution Channels (경 쟁기업의 유통라인 참여를 제약하여 자사의 이익을 극대화 한다는 의미) - It makes sense to tie up the distribution channel in order to deny access to the rivals l 해당 제품의 유통시장이 독과점 구조를 갖고 있을 경우 유통회사를 인수하여 경쟁 기업의 유통시장 접근을 제 한하면 자사의 이익을 증가시킬 수 있다는 논리 l Three possible limitations – – – Could be a violation of anti trust laws Price paid for the downstream firm may reflect the full value of the monopoly power 독과점 유통기업 인수에 많은 비용을 지불 할 경우 인수로 인한 이윤증가보다 비용이 더 클 수 있음 Competitors may be able to open new distribution channels
Reasons to Buy rather than Make 시장구매가 유리한 경우 l l l Market firms (outside specialists) may have patents/proprietary information that makes low cost production possible Market firms can achieve economies of scale that in-house units cannot Market firms are subject to market discipline, whereas in-house units may be able to hide their inefficiencies behind overall corporate success (Agency and influence costs)
Economies of Scale
Economies of Scale l l A given manufacturer of automobiles may not be able to reach the minimum efficient scale (A*) for anti-lock brakes An outside supplier may reach the minimum efficient scale by supplying to different automobile manufacturers
Economies of Scale l l Will the outside supplier charge c* (its average cost) or c’ (the average cost for the manufacturer for in-house production)? The answer depends on the degree of competition faced by the supplier (부품 시장이 경쟁이 심하면 C*까지 가격하락. 만약 부품 공 급 시장이 독과점에 가까우면 C’에 접근할 것임)
내부생산의 비용 Agency and Influence Costs The incentives to be efficient and innovative are weaker when a task is performed in-house l Agency costs are particularly problematic if the task is performed by a “cost center” within an organization l It is difficult to internally replicate the incentives faced by market firms ** Cost center: 매출이나 수익을 창출하지 않는 지원부서 로 시장경쟁에 노출되지 않기 때문에 비효율적일 경우 에도 탐지 되지 못하는 경우가 많음 l
Influence costs (영향력 비용) In addition to agency costs, performing a task in-house will lead to “influence costs” as well Ex. 기업 내부 자금 배정과정에서 생겨나는 영향력 비용 “Internal Capital Markets” allocates scarce capital - Allocations can be favorably affected by influence activities - Resources consumed by influence activities represent “influence costs” - 영향력 비용은 영향력을 행사하는 과정에 소요되는 시간 과 비용만이 아니고 영향력 행사로 인해 자원 배분이 왜 곡되어 발생되는 비용도 포함 l
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