Strategic alliances

Organizational structure

Involves cooperation, coordination, and

inforation sharing for a joint project by the
participating firms

Economy of scale

Achieve through vertical collaboration (e.g.

tile manufacturer teamed up with interior
designeror they may also involve firms
that are not in the same industry. Vertical
integration is preffered when the ability of
outside market specialist to achieve
economy of scale is limited

Vertical integration
Horizontal integration

Likelihood of anti-trust secruity

Implies a greater level of coperation,

coordination, and information transmission
making it closer to vertical integration
The risk of information leakage is more
severe in alliances because the conditions
that tend to make alliance desirable that
often force the parties to exchange a
considerable amount of closesly held
information

Joint ventures

M&A

Aliiance where a new independent

organization is created and jointly owned
by the promoting firms

For efficiency reason, M&A can increase the

economies of scale and scope

Doing Business
1840 Numerous Intermediaries
Substantial price risk fro
participants
Infrequent transactions
Scarcity of Information

1910 1. Mass production technolgies

made possible of high volume low
cost manufacture
2. Railroad dominated
transportation and allowed mass
distributors to reach scattered
customers
3. Telegraph and telephone
improved
4. Manufacturing became more
vertically integrated
5. Multidivisional firms emerged
6. Industries became concentrated
7. Increased labor related conflicts

2009 1. Vertically integrated firms have

been decining
2. Alliances and JV work better
than M&A
3. Diversification yields to
"deconglomeration"
4. Adopt complex matrix structures

Infrastructure
Poorly developed
Many small family run firms
Markets were local

Transportation
Railroads were fragmented
Waterways for long distance

Communication
Postal service was dominant
Relied on the horse and
stagecoach
Telegraph was expensie and
important for time-sensitive
information

1. Air, Rail, Ground are better

coordinated

1. Sophisticated communication
and data processing technologies
2. Capacity for instantaneous
transmission of complex
information
3. Technology enhanced worker
productivity
4. Coordination of activities has
become easier

Finance
Business were proprietorship or
partnership --> long term debt
difficult to obtain
Shares of stock were not easily
traded and cost of capital was high
No institutional mechanism existed
Futures trading was yet to come

1. Securities markets traded share

of industrial firms
2. Credit bureaus porvided credit
related info
3. Innovations appeared
4. Public disclosure was in vogue

1. Regulation --> stable financial

sector
2. Capital market become more
active in evaluating firm
performance
3. Globalization --> m&a become
possible
4. Liquidity crisis slowed the
economic in 2008

Production Technology
Factories used century old
methods of production
Texitle was mechanized
Use of standardized parts
was just beginning
High volume and scale
intensive production non
exist

Government
Involved in larga
infrastrucutre investment
Govt. regulation in business
was emerging
Prime meridien conference

1. Government regulation
extended to such areas,
corporate law antitrust, ad
worker safety
2. Increased regulation
forced managers to collect
data on internal operations
3. Mandatory secondary
schooling

1. Modern technologies
1. Traditional regulation has
made low-cost tailor made been relaxed
production possible
2. Regulation increased in
some areas (workplace
safety, discrimination and
environmental protection)
3. Intergovernmental traties
--> free trade zones
4. Anti trust policy
5. Government policy
support basic research and
R&D projects

Business
Limited production to traditional
modes
Serving local markets
Mass production technologies would
not have been useful
Info about prices, sellers, and buyers
was not readily available
Credit available based on personal
relationship
Business were small and informally
organized
1. Expansion of markets, product
lines, and production scale
2. High volume production due to
new technologies
3. Growth of financial infrastructure
--> large firms became viable

1. Market size increased

2. Focus on narrow range of activities
and enjoy economies of scale
3. Financial innovations enables
faster growth