Governance modes

Question 1

Market: (buying resources)

Answer 1

o Pros: efficient information processing, high-powered incentives, bargaining power
o Cons: High transaction costs due to market failure: opportunistic behavior, asses specificity (small numbers), uncertainty, inseparability of assets. Information asymmetries, market power

Question 2

Autonomous: (make)

Answer 2

o Pros: authority over activity, quality control, leverage R&C, incremental growth, compatible with culture, Internalizes learning, Encourages intrapreneurship
o Cons: Increased bureaucracy, Loss of flexibility, Potential overcapacity, need to build new resources, Unsuccessful efforts are difficult to recoup, Adds to industry capacity

Question 3

Alliance

Answer 3

o Pros: Access to a particular resource, Economies of scale, Risk and cost sharing, Learning, Speed to market, Flexibility, Blocking competitors, Assessing acquisition partner
o Cons: Loss of proprietary Information, Management complexities, Financial and organizational risks, Risk of becoming dependent, Antitrust implications, Learning barriers

Question 4

Merger

Answer 4

o Pros: Obtain full control, Protect sensitive technology, No conflicting objectives, Better record for expanding core business, Access to complementary assets, Removal of potential competitor, Upgrade corporate resources, No impact on industry capacity
o Cons: Cost of acquisition, Unnecessary adjunct businesses, Loss of key people, Wasteful use of limited resources, Acquisition targets sometimes unavailable, Organizational clashes may impede integration, Large commitment

Question 5

Networks

Answer 5

o Pros: Access to information and resources, Quicker identification of opportunities, Leverage assets faster and better quality, Speed to market, Strategic flexibility
o Cons: To what extent are networks manageable, Reputation effects, Network boundaries, Which relationships?