41002072 李民权1Exam Questions (50% each)1) Gili, a Chinese car maker, is spending a very large amount of money buying another foreign car producer. According to the theories in this course, do you think this is a good deal?Take Chinese Geely close to Volvo acquisition for example, I dont believe its in the best interest for Chinese carmakers.Chinese carmaker Geely is said to be in the final spurt to acquire Sweden -based Volvo Cars from Ford-but analysts are already criticizing the deal.1. Mergers and acquisitions (abbreviated M Physical asset specificity, e.g. a specialized machine tool or complex computer system designed for a single purpose; Human asset specificity, i.e., highly specialized human skills, arising in a learning by doing fashion; and Dedicated assets, i.e. a discrete investment in a plant that cannot readily be put to work for other purposes. Malone et al. (1987) made an important addition to the above list: Time specificity, an asset is time specific if its value is highly dependent on its reaching the user within a specified, relatively limited period of time. Joskow (1988) pointed out that these different categories point to essentially the same phenomenon, but that it is instructive in empirical analyses to treat each category distinctly. Joskows series of papers have looked at contract structuring in order to examine how contracts mitigate transaction costs inherent in a market based relationship Zaheer and Venkatraman (1994) acknowledge four asset specificity dimensions: site, human, physical, and dedicated assets. In addition, they define two dimensions of asset specificity in their study: human asset specificity and the newly-developed “procedural asset specificity“, where Human asset specificity deals with the degree to which skills, knowledge and experience of the agencys personnel are specific to the business process. Procedural asset specificity incorporates notions of human asset specificity and refers to the degree that an agencys workflows and processes are customized to exploit the other partys capabilities. Most theoretical work focus on the relationships between asset specificity and sunk cost effects, transaction costs, vertical integration, and uncertainties. 3.Compare with outsourcing Outsourcing is the process of contracting an existing business process which an organization previously performed internally to an independent organization, where the process is purchased as a service. Though this practice of purchasing a business function - instead of providing it internally - is a common feature of any modern economy, the term outsourcing became popular in America near the turn of the 21st century. An outsourcing deal may also involve transfer of the employees involved to the outsourcing business partner. Although the definition of outsourcing includes both foreign or domestic contracting, the term is sometimes used exclusively referring to the former. The more clear term for this is offshoring, which is described as “a company taking a function out of their business and relocating it to another country,” whether the external country is physically offshore or not. The opposite of outsourcing is called insourcing, and is sometimes accomplished via vertical integration. The most common reasons why companies decide to outsource include cost reduction and cost savings, the ability to focus its core business, access to more knowledge, talent and experience, and increased profits. Many companies decide to outsource because it cut costs such as labor costs, regulatory costs, and training costs. Foreign countries tend to have workers who will complete the 41002072 李民权3same amount of work as in the United States, but for less than half the salary that an American employee will make . This motivates companies to outsource overseas to find foreign workers who are willing to work for these lower wages. The company can spend up to half the usual cost to train these workers to become experts in a different country . Lower regulatory costs are an addition to companies saving money when outsourcing. Comparing the costs to employing a worker in the United States to a worker in China, it is noticed that an employer in the U.S. has to pay higher taxes (social security, Medicare, safety protection (OSHA regulations) and also FICA (taxes). Companies are able to focus their money and resources more towards improving the core aspects of its business when outsourced. For example an insurance company may outsource its landscaping functions to a service provider that specializes in landscaping since it is irrelevant to the core operations of insurance. The landscaping is performed by an expert outsourced organization and the insurance company can focus on doing what it specializes in. This allows the outsourcing company to build onto its core functions that keep the business running smoothly. Another example is that companies and publi