Chapter 14

Question 1

Relational contracts

Answer 1

No written contract at all,security needed for transaction-specific inv.,flexibility to meet changes

Question 2

Franchising

Answer 2

Contractual agreemtn between the owner of a business system and trademark that permits the franchisee to produce and market the franchiser’s product or servie in a specified area

Question 3

When choosing a vertical relationship need to consider

Answer 3

Resources,cap. and strategy,allocation of risk(depends om barganing power and efficency considerations),incentive structures(opportunistic beh. is the bugbear of market contracts)

Question 4

Virtual corporation

Answer 4

Firm,whose primary function is to coordinate the activities of a network of suppliers and downstream partners=systems integration

Question 5

Transaction costs

Answer 5

Search costs,negotiating costs,monitoring costs,enforcement costs

Question 6

2 factors which influence the org.effiency about ec.activity

Answer 6

Technology and management techniques

Question 7

Outsourcing

Answer 7

Enhances flexibility,concetrate on activites for which the firm possesses superior capabilities

Question 8

Vertical integration

Answer 8

Firm’s ownership of vertically related activities

Question 9

Backward integration

Answer 9

Where the firm takes over ownership and control of producing its own components or other inputs

Question 10

Forward integration

Answer 10

Where the firm takes over ownership and control of activities previously undertaken by its customers

Question 11

Technical economies

Answer 11

Cost savings that arise from the physical integration of processes

Question 12

2 stages of production at a single location

Answer 12

Reducement of transportation and energy costs,common ownership

Question 13

1 supplier,1 buyer

Answer 13

Opportunism and strategic misinterpresentation-exploit barganing power at the expense of the other

Question 14

Transaction-specific investment

Answer 14

Result in transaction cost arising from the difficulties of framing a comprehensive contract and the risks of disputes and opportunism that arise from contracts that do not cover every possible eventuality,where this type is required vertical integration is used

Question 15

Shared service organizations

Answer 15

Internal suppliers of corporate service compete with external suppliers of the same services to serve internal operating divisions

Question 16

Long-term contracts

Answer 16

Involve series of transactions over a period of time and specify the terms of sales and the responsibilities of each party

Question 17

Spot contracts

Answer 17

They are good when there are comp.conditions and no need for transaction-specific inv. by either party