Forum Responses To Peers

Diseconomies of scale occur when the volume of production results in increase in per unit cost.  We see this within hospitals frequently and especially in emergency departments as the number of patients exceed capacity and the increased volume results in higher costs to provide care (variable costs with physician/nursing/support staffing) often times without reimbursement to cover these costs.  With regard to corporate strategy, organizations want to take advantage of economies of scale and ideally produce the quantity output which decreases cost per unit to the lowest level possible.  With regard to healthcare, some clinics are able to limit this but their moral obligations along with the desire to provide patient care to those who need it often forces clinics and hospitals to accept and care for patients beyond their capacity.

Forum #2

In today’s market concerning differentiation advantage, there is no such thing as a commodity. Hence, all goods and services are differentiated. When the generic product is undifferentiated, the offered product makes the difference in getting customers and the delivered product in keeping them. A desirable objective of an economic system is to maximize the well-being of society. Buyers must benefit from what they buy and sellers must benefit from what they sell. When people buy something, they generally pay less than what they were willing to pay for the good or service. Consequently, the difference between the willingness-to-pay price and the market price is the consumer surplus. Likewise, sellers can sell a product at a higher price than their economic cost to produce a product. The difference between the economic cost and the market price is the producer surplus.

Productive efficiency is concerned with the optimal method of producing goods, which is producing goods at the lowest cost. Allocative efficiency is concerned with the optimal distribution of goods and services. For example, an economy could be productively efficient in producing large numbers of boots, but if they were all for the left foot, it would be allocatively inefficient as no one would benefit from these low production costs. Therefore, markets comprised of differentiated markets are not guaranteed to maximize social surplus. As a result, the maximization of all market social surpluses not only depends on the consumers' willingness to pay for a commodity, but the actual price paid by them, otherwise known as the equilibrium price.


[1] Original forum was: 

Discussion threads (to get things started):

1) Dyer Chapter 4 (Cost Advantage)

Let's discuss this chapter! Here are some tasks to get you started (pick one or two and jump in):

· Pick a key terms on pg. 82 (a terms that someone else hasn't already picked) and defined it (in your own words), then explain why it's important to corporate strategy

· Pick a review question on pg. 82 (a question that someone else hasn't already picked), and answer it, then comment on a question that someone else has answered

A couple thought questions:

Isn't the message of this chapter basically that the biggest company wins? Why or why not?

Why does this chapter treat labor inputs (see pg. 80) as equivalent to material inputs? If a company figures out how to make product X using less steel or less glass, assuming the end result has the same utility as the original product, then the company has created additional economic value, right? If a company leverages its bargaining power to force suppliers of steel or glass to lower their prices, has it created any economic value? If is does the same with respect to labor, has it created any economic value?

Here's a concrete example. Company A makes product X and it sells for $10. Because this company has a captive work force (it's the largest employer in a small town), it is able to lower wages. It uses labor savings to lower the price of product X to $9. Has the company created any additional economic value?

2) Dyer Chapter 5 (Differentiation Advantage)

You can address any/all of these questions or any of the review questions on pg. 103:

· The textbook uses Facebook as a "differentiation" story. Wouldn't this same "story" apply no matter which company had succeeded (since they’re all different, MySpace, Friendster, etc.)? If that's true, then what's the point? Is Facebook's success really an example of successful differentiation? Why isn't the rise of Facebook better explained by network externalities?

· How are economic markets are supposed to work if every product is differentiated? Properly functioning economic markets are supposed to deliver allocative and productive efficiency, and they're supposed to maximize social surplus. Will markets comprised of differentiated products deliver these outcomes? Why or why not? What does the Walters chapter say is necessary if markets are to function properly? Why is this question important?

· When does marketing become lying?

· What does it mean to "hire" a product to do a "job" for you? Is this a useful perspective? Why or why not?

· What does it mean to map the consumption chain?

3) Dyer Chapter 6 (Corporate Strategy)

You can address any of these questions (or any of the review questions on pg. 124):

· Explain the different levels of diversification.

· Explain what it means to create economic value. Explain what it means to add value through diversification (see Figure 6.1). Are these two things the same? Is one a subset of the other? If I'm a shareholder of two different companies, why might I want them to merge?

· What are the six Ss?

· Can value be added in the same way regardless of the type of diversification? Or are there better ways to add value depending on the type of diversification involved?

· What does it mean to destroy economic value? Give you provide a specific example?

· What are the methods of diversification?

4) CSR text, Chapter 1 (What is CSR?)

From the book (Review Questions):

· A convenient marker for the start of the modern CSR era is the publication of Bowen’s book, Social Responsibilities of the Businessman. What questions did Bowen ask in this book? Why are these questions still relevant today?

· How is CSR different from Adam Smith’s concept of the invisible hand? Why is this important?

· Based on the definitions of CSR in the chapter—including the author’s definition—what do you believe are the essential elements of CSR? Why?

· Describe some of the CSR programs or activities you discovered on the websites of the company listed in Table 1.

· Briefly describe the Concentric Circle Model of CSR and the CSR Pyramid. Explain how these models inappropriately compartmentalize economic, legal, and ethical considerations.

· List and briefly describe the CSR-related terms highlighted in the text: sustainability, corporate citizenship, corporate social performance, philanthropy, stakeholder theory, and systems theory.

Here's a couple big picture questions: What does CSR have to do with economic value (from our first discussion in Module 2)? What does (or should) CSR have to do with corporate strategy?

5) Bonus Thread

The Academy of Management Review, probably the most respected theoretical academic journal in the management field, just published a special topic forum on management theory and social welfare. There were a number of papers published in this forum. I'm attaching the forum introduction:

Jones et al 2016 Social Welfare.pdf 

If you are interested in the topic of corporate social responsibility from a more philosophical standpoint, download this article and take a look at the section "Why the Eerie Silence?" that begins on page 220 and ends on page 225 (the last two pages–the "Conclusions and Implications" section–are also relevant).

Here's a few questions to get this thread started:

Take a look at your strategy textbook. Is there anything in our text that you could use to differentiate between corporate strategies that are likely to result in Pareto improvements and strategies that are likely to lead to Pareto inferior outcomes (see page 223 and 224 of the attached article)? According to our textbook, against what yardstick should potential strategies be measured? Why? What does this article say about that approach? Who's right (our textbook or this article)? Maybe a better question is this: "When is our textbook right, and when is this article right?

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