The strategy was executed through a market-entry mode because of the cost associated with building a cement plant from scratch. For CEMEX, how has international diversification resulted in a competitive advantage? This strategy has resulted in a competitive advantage because CEMEX has managed to reduce the cyclical nature of its cash flow and maintained a competitive advantage in the markets in which the firm operates. IV. Vertical Integration. Occurs when one corporation owns business that make inputs for other business units in the same corporation. Forward integration. Occurs when a firm owns or controls the customers or distribution channels for its main products. Backward integration. Occurs when a firm owns or controls the inputs it uses. Extra Example: See the article "A Bargain-Priced Hatch", , Wall Street Journal (Online) [New York, N.Y] 31 Dec 2011. An article on how Hyundai Motors is using vertical integration to its advantage. A. Associated with Vertical Integration. To understand why a firm should vertically integrate, we must understand the difference between transaction and administrative costs. Administrative costs refer to the costs a firm incurs to coordinate activities between business units. Transaction costs are costs associated with obtaining a product or service from a contractor or supplier. 1. Advantages a. Potential cost reductions in production b. Improved coordination and quality control c. Protection of proprietary technology or processes
The strategy was executed through a market-entry mode because of the cost associated with building a cement plant from scratch. For CEMEX, how has international diversification resulted in a competitive advantage? This strategy has resulted in a competitive advantage because CEMEX has managed to reduce the cyclical nature of its cash flow and maintained a competitive advantage in the markets in which the firm operates. IV. Vertical Integration. Occurs when one corporation owns business that make inputs for other business units in the same corporation. Forward integration. Occurs when a firm owns or controls the customers or distribution channels for its main products. Backward integration. Occurs when a firm owns or controls the inputs it uses. Extra Example: See the article "A Bargain-Priced Hatch", , Wall Street Journal (Online) [New York, N.Y] 31 Dec 2011. An article on how Hyundai Motors is using vertical integration to its advantage. A. Associated with Vertical Integration. To understand why a firm should vertically integrate, we must understand the difference between transaction and administrative costs. Administrative costs refer to the costs a firm incurs to coordinate activities between business units. Transaction costs are costs associated with obtaining a product or service from a contractor or supplier. 1. Advantages a. Potential cost reductions in production b. Improved coordination and quality control c. Protection of proprietary technology or processes
chapter-06_lecture-notes.docx