10. The scope of the firm
mercoledì 13 ottobre 2021 14:16
Scope: about size
DETERMINANTS OF COMPANY SIZE:
• Geographical extension : the dimension depends on how many markets, where the ac
• Horizontal extension (diversification): the likehood for a company to be present in mul
the number of business, greater the numb. Of employees
• Vertical extension (vertical integration): all the steps of the value chain are taking place
fully integrated
Ex. Marinella case (they produce ties) see slide 2
Vertical extension
Packaging
Ironing
Washing
Weaving
Designing
Shirts/bags/perfumes/accessories
horizontal extensio
Naples
Italy
europe
Geographical
1. HORIZONTAL EXTENSION
How many business do we want to be in? SBA= strategic business unity
Monobusiness unity or multibusiness unity?
When do i do it?
Criteria for decision:
• Cash flows absorbing capacity of SBAs (financial synergies)
○ Timing of the production cycle
○ Phase of the industry lifecycle= do i join a new market (i'll have less costumers b
a mature one (i'll have to fight--> red ocean)?
• Attractiveness of the market and competitive positioning in the SBA: what's the poten
• Economies of scope: when a company experience a reduction in the avarage cost per u
generated by the fact that the company is delivering to the market a wider range of pr
simultaneos production/sales of 2 or more goods generates advantages that do not oc
(see graph slide 4)--> i use assets that i alredy have, synergies
SOURCES:
○ Sharing
§ Sales structure: distribution channels and networks
mercoledì 13 ottobre 2021 14:16
Scope: about size
DETERMINANTS OF COMPANY SIZE:
• Geographical extension : the dimension depends on how many markets, where the ac
• Horizontal extension (diversification): the likehood for a company to be present in mul
the number of business, greater the numb. Of employees
• Vertical extension (vertical integration): all the steps of the value chain are taking place
fully integrated
Ex. Marinella case (they produce ties) see slide 2
Vertical extension
Packaging
Ironing
Washing
Weaving
Designing
Shirts/bags/perfumes/accessories
horizontal extensio
Naples
Italy
europe
Geographical
1. HORIZONTAL EXTENSION
How many business do we want to be in? SBA= strategic business unity
Monobusiness unity or multibusiness unity?
When do i do it?
Criteria for decision:
• Cash flows absorbing capacity of SBAs (financial synergies)
○ Timing of the production cycle
○ Phase of the industry lifecycle= do i join a new market (i'll have less costumers b
a mature one (i'll have to fight--> red ocean)?
• Attractiveness of the market and competitive positioning in the SBA: what's the poten
• Economies of scope: when a company experience a reduction in the avarage cost per u
generated by the fact that the company is delivering to the market a wider range of pr
simultaneos production/sales of 2 or more goods generates advantages that do not oc
(see graph slide 4)--> i use assets that i alredy have, synergies
SOURCES:
○ Sharing
§ Sales structure: distribution channels and networks
