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| The process of acquiring or merging with industry competitors to achieve the competitive advantages that arise from a large size and scope of operations. |
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| When a company uses its capital resources to purchase another company. |
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| An agreement between two companies to pool their resources and operations and join together to better compete in a business or industry. |
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| Offering customers the opportunity to purchase a range of products at a single, combined price; this increases the value of a company’s product line because customers often obtain a price discount when purchasing a set of products at one time, and customers become used to dealing with only one company and its representatives. |
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| When a company takes advantage of or leverages its established relationship with customers by way of acquiring additional product lines or categories that it can sell to them. In this way, a company increases differentiation because it can provide a “total solution” and satisfy all of a customer’s specific needs. |
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| When a company expands its operations either backward into an industry that produces inputs for the company’s products (backward vertical integration) or forward into an industry that uses, distributes, or sells the company’s products (forward vertical integration). |
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| When a company is taken advantage of by another company it does business with after it has made an investment in expensive specialized assets to better meet the needs of the other company. |
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| When a firm uses a mix of vertical integration and market transactions for a given input. For example, a firm might operate limited semiconductor manufacturing while also buying semiconductor chips on the market. Doing so helps to prevent supplier holdup (because the firm can credibly commit to not buying from external suppliers) and increases its ability to judge the quality and cost of purchased supplies. |
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| When a company decides to exit industries, either forward or backward in the industry value chain, to its core industry to increase profitability. |
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| The price that one division of a company charges another division for its products, which are the inputs the other division require to manufacture its own products. |
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The use of long-term relationships, or investment in some activities normally performed by suppliers or buyers, in place of full ownership of operations that are backward or forward in the supply chain. |
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Long-term agreements between two or more companies to jointly develop new products or processes that benefit all companies that are a part of the agreement. |
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| A means of exchanging valuable resources to guarantee that each partner to an agreement will keep its side of the bargain. |
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| A believable promise or pledge to support the development of a long- term relationship between companies. |
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| A policy in which a company enters into long-term contracts with at least two suppliers for the same component to prevent any incidents of opportunism. |
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| The decision to allow one or more of a company’s value-chain activities to be performed by independent, specialist companies that focus all their skills and knowledge on just one kind of activity to increase performance. |
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| When companies pursued extensive strategic outsourcing to the extent that they only perform the central value creation functions that lead to competitive advantage. |
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