Managerial Economics 13th Edition by James McGuigan,Charles Moyer,Frederick Harris

Exercise 21

Borders Books and Amazon.com Decide to Do Business Together
Borders Books, once the leading chain of bookshop retailers, entered into an agreement with Amazon.com, the online retailer, to fulfill Internet orders from the Borders.com Web site. Using Table and the following questions, what organizational form would you predict for this business relationship
TABLE EFFICIENT ORGANIZATIONAL FORM DEPENDS ON ASSET CHARACTERISTICS
Is your answer consistent with the multiyear fee-for-service contract between Borders and Amazon.com whereby Amazon processes the order, ships the book, records the sales, and pays Borders a referral fee One Borders executive described this as a "low-risk, low-return" approach to online sales while retaining Borders's focus on its core mission of running bookshops. This approach acknowledged the attraction of on-line book purchasing for segments of the Broders target market but failed to recognize the e-book revolution still sweeping across book retailing. Borders has declared bankruptcy and been liquidated; business strategy is not secured by efficient contracting.