Question

Consider firm organization:

a. Very briefly explain why corporations with sufficiently diffused ownership are typically governed by a board of directors and why such a board typically includes members from outside of the corporation.

b. Identify the three sources of cost that vertical integration is intended to mitigate or eliminate. However, no firm is completely vertically integrated, implying there is a cost to vertical integration. Identify this cost and very briefly relate it to firm size and scope.

Answer 1

ans a) An organisation with sufficiently diffused ownership means the board of directors are governed the all managerial activities very ethical and efficient manner according to corporate governance rules and regulations. The diffused ownership means to include some other members from the outside in the board of directors .Thay is very helpful for the better governance in between companies internal shareholder and management and other stakeholder. That very useful for the better governance activities.

ans b) Vertically integrated organisation is the type of integration by which a company choose the startegy where an organisation control it's supplier ,distributers ,retailers in a supply chain based.That help to widen their manufacturing and retail activities regarding the sell of goods and service around the world.mostly it is help to more productivity but it lead to very costly in the case of mainly large type of organisation and the integration should widened with the extra incurring cost to the vertical integration process.