Question

1. The following question is about which factors control the choice of model for purchasing. Substantial spe- cialised invest- ments relative to contracting costs? No SPOT EXCHANGE YES Complex contracting environment rela- tive to costs of integration? NO YES CONTRACT VERTICAL INTEGRATION 1.1 What is meant by spot exchange? 1.2 What does it mean for a manufacturing firm to vertically integrate? 1.3 What is a benefit of alliances and joint ventures over mergers and acquisitions? 1.4 Referring to the diagram, what are the arguments behind the options yes and no in the different steps? In your answer, describe and define the following terms: transaction costs, hold-up problems, and contracting costs.

Answer 1

Answer 1.A foreign Spot Exchange also known as FX spot is an agreement between two parties to buy one currency against selling another currency at an agreed price for settlement on the spot date the exchange rate at which the transaction is Dallas what exchange rate. Spot Exchange is a price to exchange one currency for another for immediate delivery the spot rates represent the prices by ISP in one currency to purchase a second one. Answer 2. Contrary to horizontal integration which is consolidation of many forms that handle the same part of production process vertical integration is type of 5 by 1 for engaged in different parts of reduction example growing of raw materials manufacturing transporting marketing and retail vertical integration can further be elaborated as an arrangement in which supply chain of company is owned by that company usually each member of the supply chain produces a different product or service and the products combined to satisfy a common name it is closely associated with vertical extension which is in Economics in growth of the business enterprise to the acquisition of companies that produce the intermediate goods needed by the business or help market and distribute its production + expansion is decide because it's supplies and Secure needed things needed by the form to produce its product in the market such expansion can become undesirable when its action become anti competitive and free competition in market place there are three types of vertical integration backward integration forward integration and balanced vertical integration a company exhibits backward vertical integration method controls subsidiaries that produce some of the inputs and used in the production of its products company tends to word for word vertical integration when it controls distribution centers and retailers when its products are sold. Answer 3. Merger acquisition and allowances as soon as we used in business that it is only natural that there is high level of confusion before suggesting a framework to choose the three models whichever is better and what have more advantages let's discuss about it I'm also refers to process in which two companies become one by coming together in such a case No 1 company rules over then other usually the management of both companies share the control of the company and name of the companies are retained for resulting companies there a high profile examples of mergers AOL time warnar . Hero Honda Sony Ericsson and many other each of these cases name of both companies were written in order to leverage the equity of both brand names therefore simply put mergers create new organization out of two or more organisation of more or less = structure pulling all resources. Stations on the other hand defexpo processes in which one company buys the other company in such a situation the company buying observed the boat company into the existing company exhibitions can be carried out either to eliminate competition by observing the Competent company and to expand the corporate portfolio by retaining the acquired company as an independent entity under the overall corporate management the latter case is in at the heart of many company is the purpose of acquisition was to enter the highly Indian mobile market India became Vodafone largest Market after us as an evident from many example mentioned above mergers and acquisitions of three purposes as a market entry strategy as a corporate portfolio expansion tool as a comparable defence mechanism. The benefit of alliance in joint ventures is that the management of the new company that has overtaken has the power of controlling the finance and the other important managements joint venture and strategic alliances allowed companies with complimentary skill to benefit one another strength in joint venture the company start an investor new company that's jointly owned by both companies Daisy common Technology manufacturing and commercial real estate development in whenever a company wants to expand IT sales operations into foreign country in a joint venture the company Daisy common Technology manufacturing and commercial real estate development in whenever a company wants to expand IT sales operations into foreign country in a joint venture the company start and there is a common Technology manufacturing commercial real estate development in any other company wants to expand its sales operations into a foreign country in a joint venture the companies can start and invest in new company that jointly go and buy the parent companies a a strategic Alliance is a legal agreement between two or more companies to share access to their Technology trademarks and other asset and it does not create a new company both forms of partnership can be used to transfer Technology assets in knowledge between complementary companies. Answer 4. transaction costs or expenses incurred when buying or selling a good or service in financial sense transaction cost includes brokers commission and spreads which are the differences between the price the dealer paid for security and the price the buyer pays . the problems Central to theory of incomplete contracts and shows difficulty in writing complete contact the hold up problem new situation where two parties may be able to work most efficiently by cooperating but different from doing so because of concerns that they may give the other party increased bargaining power and thereby reduce their own profits the hold up problem leads to several economic cost and might also lead to under investment. there are cost of writing in maintaining a contract between parties they include the cost of each party verifying that the other is meeting in the terms of contract and the cost of arbitration and enforcement if there is dispute over whether terms are being met.