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Andy Lockett & Steve Thompson
Transaction cost economics (TCE)
± The cost involved while conducting any transaction such as recruitment cost, finding buyers or sellers cost and other relevant cost. These cost are not transparent but have high impact on operational cost.
Transacting party face information problem and so one will behave opportunistically Transaction where information is assemetric (for eg Sony TV.) then the transaction is fair Transaction for specialised item like (x-ray for container at terminal). Here the suppliers are few and risk of ownership is high.
TCE Academic Studies
TC are technologically determine the set may change when technology, organisation and contractual form will change. Organisation employ different forms of organisation form over substantial period. Transaction may route to different route. For eg. Toyota they have overcome selling transaction cost by staying in close contact with customers.
Case Study 7.1
Rambottom s Brewery Company 120 public houses, also own a brewery house, with bottling and distribution centre. Revenue increased from £50M-70M, the profit stayed at £3M CEO : Outsource the bottling and distribution and spend £5M from the asset to further develop the pubs. Chairman : Locals liked the taste and we might not get that test, price may increase after a year contract and socially it would bring negative impact on downsizing of employees, instead issue £5M shares and buy new pubs and expand production capacity to become largest manufacturer of brewery.
Ronald Coase 1937
Businesses as Social Institution Wages to Salary -to overcome daily hiring cost Generic Contractual Clause to have Faculty to also become the HoD
Keynesian Theory An act of Executive at micro-level could bring effect on macro-level. U Form and M Form Organisation
TCE in Strategic Management
Long term contracting is distinctively different to spot market sourcing Full Vertical Integration might be compared to joint venture. TCE in practice ± Technological and Organisational innovations impact directly on TCE ± Alternate mode of Organisation vary accross countires and culture. (Fanchise viz.Direct Investment) ± Different mode of organisation within the company impact on TCE