Using transaction costs concepts, and without paraphrasing the article, briefly explain why you think that Nortel decided to outsource its

Using transaction costs concepts, and without paraphrasing the article, briefly explain why you think that Nortel decided to outsource its

  1. Read the attached article, “Nortel quits manufacturing,” (Globe and Mail, January 23, 2004.)

 a. Using transaction costs concepts, and without paraphrasing the article, briefly explain why you think that Nortel decided to outsource its manufacturing operations to Flextronics, and why it decided to keep design and sales activities in house, (i.e., give separate explanations as to why design was kept in-house, why sales were kept in-house, and why manufacturing was outsourced.)

b. Explain the significance of the evolution of the telecoms business for Nortel’s decision. Why did it matter that “…communications equipment is now much more based on public standards rather than proprietary ones” whereas “when Nortel was the top Canadian high-tech manufacturer, everything was virtually a custom component”? (2)

a. In general, investors in publicly traded firms in the developed countries such as the USA do not value highly diversified conglomerates. One reason is that they do not see such conglomerates as a means to diversify the risks that they face. Explain why.

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