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Business Finance

San Diego State University

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I have a recorded case study presentation, and i need a quality 2 page summary.

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1 Case Study for Fin 423 Summary Case # 1 “Note on Corporate Strategy “ Team # 7 fffff ffffff Fffff fffff Fffff ffffff Ffffff ffffff Ffffff fffffff Fffffff ffffff 2/22/2025 2 Note on Corporate Strategy Corporate strategy is the underlying structure used by large diversified organizations to optimize business unit coordination across several marketplaces in order to create value inside their organization. Corporate strategy differs from competitive strategy in that it focuses on organizational improvement rather than single-market performance improvements. Business units gain a competitive market advantage through the corporate strategy by leveraging interindustry synergy. A company plan succeeds by meeting two critical criteria: the better-off test and the ownership test. Whether multiple-market operations give individual company units greater advantages over self-operation skills is determined by the better-off test. Economies of scope are the key component that enables businesses to cut expenses by producing related goods jointly. Utilizing their costly manufacturing facilities to create both truck and car bodies allows automotive companies to save money joint production between linked divisions enables firms to achieve peak operational excellence and boost their competitiveness. Honda uses horizontal diversification to reduce costs by introducing cross-selling across its power equipment and automobile product lines. The better-off test and the ownership test are used to assess whether holding a company unit yields more value than other management arrangements, such as contracts and joint ventures. By demonstrating that firm ownership is more beneficial than joint ventures or contracts when sharing intangible assets, the ownership test evaluates value. The sharing of important knowledge makes it impossible for one party to evaluate without disclosing the information, necessitating compliance with the ownership test. When vertically integrated units of National Paper's tissue and cardboard production divisions need to share manufacturing 3 capabilities, the situation becomes evident. As a business strategy tool, vertical integration is essential for making relationship-specific investments. A paper pulp manufacturer exhibits vertical integration when it constructs facilities to meet the unique requirements of a cardboard maker. As their interests match and investments are protected from opportunistic renegotiations, both businesses under joint ownership win. Vertical integration keeps high-quality retailers from losing clients to less upscale rivals, which resolves downstream free-riding issues. Manufacturers are able to preserve consumer loyalty and service quality through the integration of retail operations. When vertical units are integrated, upstream and downstream enterprises that control the market no longer need to include profit-generating margins in their operations, hence eliminating double marginalization. Numerous challenges arise during the integrating process. Due to the elimination of competitive dynamics following the integration of distinct business units, unit mergers result in incentive costs. Concentrating decision-making authority in one place leads to power struggles and capital misallocation problems that undermine cooperation and trust. Due to the underdeveloped legal systems in developing nations, businesses opt for large organizational scopes, making it impossible to trust contractual agreements. The study highlights the direct influence of organizational environments on the strategic orientation of businesses. In conclusion, meeting both the ownership and better-off tests is necessary for a company to have a successful corporate strategy. Horizontal diversification offers scope advantages and the possibility of accessing new markets, while vertical integration improves operational compatibility by granting ownership. Corporate plans of this kind must yield more value than the associated organizational costs. Precise management of the synergies obtained while controlling inefficiencies is required by corporate strategy. 4
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Case Study Summary: The Rise and Fall of AIG
Team #3


Myles Amado-Manchego



Ally Beckmann



Steven Lizalde



Garrett Mckee



Bradley Luna



Lucas Ye



Kolten Tani

Date:

The Rise and Fall of AIG
AIG was founded in the year 1919 by Cornelius Vander Starr. Cornelius spent the next
48 years building AIG internationally, until handing over leadership to Maurice Greenberg in
1967. By 2007, AIG had grown to be the biggest insurer in the world with operations in 130
countries and an asset value worth one trillion dollars. AIG operated across 3 main business
segments, insurance financial services, and derivatives. Before the 2008 housing crisis, AIG held
a triple AAA credit rating, allowing the company to borrow cheaply and expand aggressively
globally.
There are vari...

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