課件參考文稿vertical boundaries

VerticalBoundariesoftheTheprocessthatbeginswiththeacquisitionofrawmaterialsandendswiththedistributionandsaleoffinishedgoodsand(support)services(e.g.acc,fin,hr)isknownastheverticalchain(VC).AcriticalissueishowtoorganizetheVC.UpstreamandEarlystepsintheVCareupstreamintheproductionprocess,andlaterstepsareAcablesportschannelwhichassemblesapackageofentertainmentprogramming,isdownstreamfromthecontentproducerbutupstreamtothecontent“retailers”Successfulcases:VC“Verticallyintegratedfirm”:ScottPaper:cuttingitsowntimber,millingit,makingpaperproducts,anddistributingthemtothemkt.“Verticaldisintegratedfirm”:Nike,Theyoutsourcetheirtasksintheverticalchaintoindependentcontractors,fromproductiontodistribu2tionprocesses.Theverticalboundaries縱向邊界ofafirmdefinetheactivitiesthatthefirmitselfperformsasopposedtopurchasesfromindependentfirmsinthemarket.---MakeorBuyDecision Somefirmshavesucceededinperformingtheirownprocessing,handling,andsupportactivities;othersbuythemfrommarketfirms(thosewhoarespecializedatmakingthem).（使用市場）Firstly,firmsneedtocomparethebenefitsandcostsofusingthemarketasopposedtoperformingtheactiin-house.Inordertoresolvetheassociated“makeorbuy”decisions,andmakeorbuychoicescanaffecttheefficiencywithwhichactivitytocarryout,butdonoteliminatetheexpensesoftheassociatedactivities.Buy:thefirmreliesonanindependentfirmtoperformtheactivity,perhapsunderacontractMake:thefirmperformstheactivityitselfBUY:benefits使用市Mktfirmscanachieveeconomiesofscalethatin-housecannotbyonlyproducingfortheirownneeds.Mktfirmsaresubjecttothedisciplineofthemktandmustbeefficientandinnovativetosurvive.AgencyInfluencecostsMAKE:(costtobuyfrommkt)CoordinationCost:Coordinationofproductionflowsthroughtheverticalchainmaybecompromised妥協whenanactiispurchasedfromanindependentmktfirmratherthanperformedin-house.PrivateinformationmaybeleakedwhenanactivityisperformedbyanindependentmktSometransactioncostsmaybeeliminatedbyproducingactiin-house.Casestudy:MakeorBuy:EmployeeSkill2001,AdobeSystemCEOdecidedtoswitchthefocusfromgraphicdesigner(Photoshop)toformat(pdf).Thischangehasgeneratednewrequirementsforthesalespeople’sThecompanyfacedthedilemmawhethertoretraintheexistingsalesforceortohireanewsalesteam.ReferringtotheEconomiesofscale,theMKTismorecosteffectivewhenlookingatthelaborintheexistedmarketthanthefirmeducatestheirownemployees.ReasonstoExploitingScaleandLearningVIEW:focusonwhatyouaregoodat,andleaveotherstothemktMktfirmsmayprocessproprietaryinformationorpatentsthatenablethemtolowerTheymightbeabletoaggregatetheneedsofmanyfirms,therebyenjoyingeconomiesofscale.Theymightexploit利用theirexperienceinproducingformanyfirmstoobtainlearningeconomies.e.g.AutomobileproductionChrysler(antilockbrakes)IftheoutputlevelislowerthanMES,itisbetterforCtobuythebrakesfromanindependentmanufacturer(TRW).Sincethemktmightnotbeperfectlycompetitive,itispossibleforTRWtochargeapriceabovethelowestlevel.NegotiationBureaucracyEffects:AvoidingAgencyandInfluenceAgencyThecostsassociatedwithslackeffortandwiththeadministrativecontroltodeterit.Workerspursuethebestinterestsmaynotbethebestofthefirm.VerticallyintegratedfirmstendtohavecommonOHcostsmakingitdifficulttomeasureandrewardanindividualdivision’contributionIntegratedfirmshavemoredivisionsthatareinsulatedfromcompetitionandfromcustomers→hardtoassesstheperformanceofadivision→scopefordivisiontoengageinInfluenceCosts:MilgromandRobertsobservethatfirmsallocatefinancialandhumanresourcestointernaldivisionsanddepartmentsthrough“internalcapitalNaturally,managerswillattempttoinfluencethisallocation.Influencecosts=directcostsofinfluacti+thecostsofbaddecisionsthatarisefrominfluacti.EachdepartmentlobbiesforCase:SupplyrelationshipswithinGeneralMotorsillustratehowinfluacticanharmaverticallyintegratedfrom.Theprogrammanagerisunhappywiththein-houser’sbid---itistoohigh.Nosoonerwillthemanagerfindanappropriateoutsider,hegoestoheadquarterandcomplainsabouttheloss.ReasonstoTheEconomiesFoundationsofContractsContractdefinestheconditionsofexchange.ContractsarewrittentoprotectpartiesfromopportunisticTheeffectivenessofacontractdependson:the“completeness”+theavailablebodycontractAcompletecontracteliminatestheopportunisticbehavior.Factorsleadto pletecontract:Bounded=limitsonthecapacityofindividualstoprocessinformation,dealwithcomplexityandpursuerationalaims.Theycannotpredicteverycontingencythatmightariseduringatransaction.DifficultiesspecifyingormeasuringLanguageinthecontractcannotclearlydefinetheresponsibilitiesandTheperformancemaybeambiguousorhardtoThepartiesdonothaveequalaccesstoallcontract-relevantTheroleofcontractLitigation打官司canbeacostlywayof“completing”LitigationcanalsoweakenordestroybusinessContractsareanimperfectwaytoensurethattradingpartiesperformasCoordinationofProductionFlowsthroughtheVerticalTomakesurethecoordinationsuccessful,playersmustmakedecisionsthatdependonthedecisionofothers.In-houseproductioncanensureagoodfitalongalldimensionsofproduction.(timingfit;sizefit;colorfit;sequencefit)Withoutgoodcoordination,bottlenecksmayarise.Becausecontractsare firmscannotrelyonthemtoensureadequatecoordinationofdesignattributes.e.g.Benettondyesitsownfabrics,incaseofmismatchingofcolor.Siliconchipmakersmakebothwiringandwaferstoassureaprecisefit.LeakageofPrivateWhenfirmsusethemarkettoobtain sordistributeproducts,theyrisklosingcontrolofvaluablePI,whichhelpstoholdtheCA.Firmsmayfinditdifficulttoprotecttheinformationfromtheemployees.SecretformulaofCoca-Cola/DesignacontractcoststimeandarehardtoenforceRonaldCoase:transactioncostsinctime,expenseofnegotiation,writing&enforcingcontractstheriskofopportunism.Relationship-specificAsset:aninvestmentmadetosupportagivetransactionwhichcannotberedeployedtoanothertransactionwithoutsomesacrifice.Quasi-rents:準 Rent:theprofityouexpecttogetwhenyoubeginthetransactionasQuasi-rent:thedifferencesbetweentheprofitugetformsellingtoandtheprofitugetformthenextbestoption.Theextraprofitthatugetifthedealgoesaheadasplanned,versustheprofituwouldgetifuhadtoturntoyournextbestalternative. lsusaboutthepossiblemagnitudeoftheholdupproblem,aprobcanarisewhenthereareRSA.Holdupproblem:whenafirmdoesnotinvestinaRSA,quasi-rent=0;ifinRSA,quasi-rent>0.Ifthequasi-rentislarge,afirmstandstolosealotifithastoturntoitssecond-bestalternative.Thisopensthepossibilitythatitstradingpartnercouldexploitthislargequasi-rent,throughholdup.Afirmholdsupitstradingpartnerbyrenegotiatingthetermsofadeal.Afirmcanprofitbyholdingupitstradingpartnerwhencontractsare pleteandwhenthedealgeneratesquasi-rentsforitstradingpartner.Transfersomequasi-rentTheholdupproblemraisesthetransactionContractnegotiationandInvestmenttoimproveExPostBargainingPositionsReducedDoubleMarginalization邊緣Whenafirmwithmarketpowercontemplatesverticalintegrationwithanotherfirmwithmktpower,itneedstocareaboutthedoublemarginalization.Ithappenswhenanupstreamfirmexploitsitsmktpowerbysettingapricethatexceedsmargincost.Thedownstreamfirmpurchasesthesemarked-upinputsandthenexploitsitsownpowerbymarkedupagain.markinguptwicethemarginalcostthefinishedgoods’priceThesolutiontomake-or-buydecisiondependsonwhichdecisionleadstothemostefficientproduction.OrganizingVerticalBoundaries:VerticalIntegrationandIts1.Makeorbuydecision:roleofAssetTechnicalefficiency&Agencyefficiency:thecostsandbenefitsofrelyingonthemarketcanbeclassifiedasrelatingtoeithertechnicalefficiencyandagencyefficiency.TE:indicateswhetherthefirmisusingtheLEAST-COSTproductionprocess.Toachievethisthefirmcanbuyfromthemktorinvestenoughtogaintheleast-cost.AE:THEEXTENTTOWHICHTHEEXCHANGEOFGOODSandSERVICESintheVERTICALCHAINbeenorganizedtoMINIMIZEtheCOORDINAITON,AGENCY,andTRANSACTIONCOSTS. inginmakingdecisionsofMakeorBuy:needtoeconomizingtheTE&AE.T>0,asmarketcanalwaysbenefitfromaggregatedemands→AstheASincreases, rproducesa tyofspecializedassets,losingA=differencesintransactioncostswhenthefirmisverticallyintegratedorthefirmbuysfromthemkt.BUYfromthemkt:costsofnegotiate,writingandenforcingcontracts,costassociatedwithholdupproblemandunderinvestmentofRSA.CostsincreaseastheASincreases.C=thesummation=theproductionandexchangecostsunderVIminusprodandexchcostsundermkt.+ve:VI;-ve:mktbuyingIfafirmisconsideringtomakeorbuyandinput,andthereisalargemarketoutsidethefirmfortheinput,thenthefirmshouldbuytheinputfromoutsidemarketspecialistsAfirmwithlargermarketsharewillbenefitmorefromverticalintegration.AfirmwithmultipleproductlineswillbenefitmorefrombeingVEintheproductionofcomponentsforthoseproductsinwhichitcanachievemarketscale.Afirmwillgainmorefromintegrationwhenproductionofinputsinvolvesinvestmentsinrelationship-specificassetsVerticalIntegrationandAssetGrossman/Hart/MooreTheory:Byhavingcontrolovertheotherfirms’assets,afirmhasabetterbargainingpositionwhenitnegotiateswiththeotherfirmovertheoperatingdecisionsthattheycouldnotcontracton.Verticalintegrationisdesirablewhenonefirm’sinvestmentinRSAhasagreaterimpactonthevaluedcreatedintheverticalchainthantheother’sinvestmentVerticalintegrationwillbeattractivewhentherearelargeasymmetriesintheimportanceofRSIinachievingthefullefficienciesfromtheexchangeandwhereitisimportantforonepartytocontroltheuseofthoseassets.ImplicationofGHMCase:Inaninsuranceindustry,firmsfacingthechoicebetweentheindependentagentsandthein-housesalesemployees.Bynonintegration,theagentsholdthekeyasset(theclientlist);Byforwardintegration,theinsurancefirmcontrolsit.ernanceissuesinVerticalarrangementsarenotalwaysoptimal.TheprocessbywhichgobdevelopsexhibitsPathdependence.==Pastcircumstancescouldexcludecertainpossible arrangementsinthefuture.PathdependencesuggeststhatfirmsaffectVIbysellingproductstodownstreambuyersbesidesitself.Theacquiredfirmswouldknowhowtoselltomultiplebuyersratherthanfortheinitiallyinternalusedistractionorlackingresources.VIandArm’s-lengthmktexchangearenott