1.What are three sources of economies of scale? (U12,P272)
1)spreading fixed costs over a large volume
2)utilizing production facilities more intensively
3)increasing bargaining power with suppliers
2.What are the three advantages of First mover? (U14,P319)
1)the ability to pre-empt rivals and capture demand by establishing a strong brand name
2)the ability to build up sales volume in that country and ride down the experience curve ahead of
rivals and gain a cost advantage over later entrants
3)the ability to create switching costs that tie customers into products or services making it difficult
for later entrants to win business
3.Please describe the advantages of Vertical integration (making component parts in-house). (U16,P367)
1)lower costs - if a firm is more efficient at that production activity than any other enterprise, it may
pay the firm to continue manufacturing a product or component part in-house
2)facilitate investments in highly specialized assets - internal production makes sense when
substantial investments in specialized assets (assets whose value is contingent upon a particular
relationship persisting) are required to manufacture a component
3)protect proprietary technology - a firm might prefer to make component parts that contain
proprietary technology in-house in order to maintain control over the technology
4)facilitate the scheduling of adjacent processes - the weakest argument for vertical integration is
that the resulting production cost savings make planning, coordination, and scheduling of adjacent processes easier
4.Please describe the pressures for cost reductions. (U12)
1)in industries producing commodity type products that fill universal needs (needs that exist when
the tastes and preferences of consumers in different nations are similar if not identical) where
price is the main competitive weapon
2)when major competitors are based in low cost locations
3)where there is persistent excess capacity
4)where consumers are powerful and face low switching costs
5.What are the uses of Electronic Data Interchange (EDI)? (U16,)
1)facilitates the tracking of inputs
2)allows the firm to optimize its production schedule
3)lets the firm and its suppliers communicate in real time
4)eliminates the flow of paperwork between the firm and its suppliers
6.What three basic decisions should firms make before entering foreign markets? (U14,P318)
1)which markets to enter
2)when to enter those markets
3)on what scale。