Horizontal boundaries: the horizontal boundaries of the company are mainly intended to identify the quantities and varieties of products and services it produces. Economies of scale and scope arise mainly from a few reasons such as: inventories, increased productivity of variable inputs Sources for economies of scale and scope-1-Economies of scale and scope in purchasing2-Economies of scale and scope in advertising3- Economies of Scale and Scope in R&DVertical integration is more attractive when the ability of external market specialists is relative to the firm itself to achieve size or scope, the larger the scale of the firm. Benefits and Costs of Using Marketplace 1) Marketplace businesses can achieve economies of scale that internal departments only for their own needs. 2) Market enterprises are subject to regulate markets and should be efficient and innovative. 3) There could be many types of costs involved such as transaction cost (market usage costs which are saved by centralized management), inventory, labor cost and so on. Vertical integration changes the pattern of ownership and control of assets and also alters the bargaining power between the parties in a vertical relationship. This will be more attractive when there are large asymmetries in the importance of relationships. Competitive Advantage: Building a competitive advantage based on position of differentiation is likely to be attractive when there are untapped opportunities to achieve scale, reach and learning. There are different types of approaches to estimate the firm's advantageous position.2) Conjoint analysis3) Attribute evaluation methodFirms can also be tied together in cooperative relationships in long-lasting networks. The long... half the documents......battle (rights not specified in contracts). • Vertical integration transfers residual control rights to the firm. • With complete contracts it does not matter who owns the assets in the vertical chain. Governance and vertical integration • The use of market firms leads to contractual inefficiencies • Vertical integration replaces contracting with governance • Delegation of decision rights and control of activities occurs within the firm rather than between firms. • Poor governance can negate the benefits of vertical integration • Post-merger conflicts may not allow cooperation between managers of the acquiring firm and the acquired firm. Alternatives to vertical integration-1. Reduced integration (create some and buy the rest)2. Joint ventures and strategic alliances3. Semi-formal collaborative relationships based on long-term implicit contracts between companies