Mofs

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MODELS, ORGANIZATIONS, and FIRMS

Instructional Goals: You will understand:

• That Markets and organizations are alternative venues for exchange • That the choice of venue boils down to a question of information costs • That these costs depend upon the trustworthiness of the players and attributes of the market

Additional Objectives:

 Why organizations now pay attention to creating value for customers than to inter-organizational rivalry.

more  Why customers matters more now than ever before building relationships with

Structure-conduct performance vs. price theory I

S-C-P Market structure determines organizational conduct Organizational conduct determines performance PT Game theory. Transaction cost analysis Contestable market analysis

Structure-conduct performance vs. price theory II

Both: Market arrangements reflect customer

tastes, wants, and needs

S-C-P

: Market arrangements/structures are givens

PT

: Actual market arrangements take the forms that they do because of conscious efforts to create and shape them. They are constantly changing

Market Power

CollusionGovernment protectionSuperior product-market strategies or

tactics;

Special knowledge that enables you to

make or deliver a product that other organizations cannot imitate or to make it at a lower cost.

Exhibit A

Transaction Cost Analysis

Institutional arrangements reflect exchange

costs:

search costsnegotiation costsmonitoring and enforcement costsThese are information costsReducing them can radically affect organizational designs and market structures

Economic Revolutions of the 20th Century

Bureaucratic revolution -- turn of the

century

Managerial revolution -- mid-centuryMarketing revolution -- NOW

Figure 1

1950

Figure 2

1950

Bottom line: MARKETS are in, SMALL is beautiful, and CUSTOMERS are sovereign.

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