MBA 8145 9/10/18 Took test. lol. It’s over now. Lecture for an hour, then make MarkStrats. [[MBA 8145 MarkStrat Notes]] Strategic Alliances - Two parties coming together to do something. Motivations: You have something that they don’t have. US has absolute advantage in both PCs and Desks. But it still makes sense for us to trade. The fact that countries can specialize in advantages is the basis for globalization. Range of Organizational Structures - Arms Length - Markets ie Kroger. - Contracts - Licensing, Distribution, Outsourcing. - Joint Ventures - A third party is formed - Acquisition - Purchasing a whole firm - Heirarchies - Employee - Employer relationship. These forms can be considered ways to get things done. # How strategic alliances create value Improving current operations - Exploiting economies of scale - Learning from parters Shaping the Competitive Environment - Facilitating tech standards - ie most phones using micro USB - Facilitating tacit collusion - collusion is illegal bruh. # Facilitating Entry and Exit Value Destruction in M&A: The Worst Offenders - Challenges to Value Creation and Allocation - Incentives to Misappropriate Value (Cheat) - An alliance is an exchange context in which - Inputs difficult to monitar - Actual value creation might be difficult to monitor. Adverse Selection - lying about how good you are. Moral Hazard - Give less than what you promised. Holdup - Exploiting the transaction-specific investment of partners. (McDonalds golden arches have no value outside of this relationship) Exchange relations in Marketing - Agency Theory - Any relationship is an agency relationship. - Citizen-Government. Citizens are the principals (they hire government) - Principals and Agents - Goal incongruence - principals and agents have different wants and goals that are at odds. Managing Agency Relationships: Summary I want the best candidate, Problem: Hidden information Solution: - Principals - Screening. (Screening is expensive) - Agents - Signaling. Adverse selection in Agency Relationships - Lemon problem. Nobel Prize George Eckeloff (used cars) - If true value is hidden, no transactions will occur. # Why signals work? Why does citibank have flashy buildings? - Because they can afford them. Free Samples - High quality manufacturers only. Low quality will be revealed. 1 Signals are expensive. Not everyone can do it. 2 Must be related to the underlying quality (hidden information) Moral Hazard Problems - AKA Hidden action problems Contracts as Solutions to Moral Hazard - Outcome based contracts. - Exams - Behavior Based Contracts - Participation, homework? Origin of Transactions Cost Analysis - Why don’t we just make contracts for everyone? - It’s more expensive, it’s inefficient. How TCA differs - Markets and heirarchies emerge as alternatives to perform the same transaction. - Basically, you want to keep making money. Reputation effects. Markets discipline bad actors. TCA assumptions: Bounded Rationality Social Man - Maximize groups welfare Economic Man - Do the right things to maximize your rewards - Requires infinite calculations Opportunistic Man - Self interest, willing to hurt people for personal gain. TCA Motivation - Because we can’t anticipate every situation, we can never write complete contracts. - Because of opportunism, incomplete contracts will be abused. - Therefore, contracts are not a complete solution for TCA. TCA Solutions: Internalization Firms can hire resources. TCA solutions: Monitoring + Contracts Clock in, clock out, long breaks. TCA Solutions: Credible Commitments Military bases shows a commitment to defending those countries. TCA Solutions: Relational Norms Doing the right thing from the get go. END MANAGING COLLABORATORS New slides, not distributed. # **Creating value through Products** First Principle #1 - All Customers Differ Steps in Segmentation, Targeting Why Segment? People are different. One-To-One marketing. - B2B, high end products, very expensive. Mass Marketing Segmentation Bases Geographic - Location Demographic - Gender, Income, Education, etc. (Too broad) Psychographic - How people thing. (Difficult to acquire) Behavioral - Frequent buyers, etc. (transaction data) Effective Segmentation Should be measureable, allows acces to customers, has high profitability potential, fits with corporate goals, is actionable. - Allows us to separate consumers. A firm can follow different targeting strategies Undifferentiated - One for All Differentiated - Some for Others Focused - All for One How to Choose a Target - Fits with firms capabilities - Profitability Potential What is [[Positioning]]? Positioning: who you are in the marketplace compared to the competition. [[Perceptual Maps]] - Graphical depictions of