The management of the internal cession prices (MICP)

Résumé du document

For many years, the problems of internal cession prices (ICP) have been as important for the practitioners as for the researchers. Williamson already wondered about the hierarchy efficiency (activities' internationalization) in comparison with the market (activities' externalization). The aim is to minimize the transaction costs. Agency theory and conventions theory also bring into question the means that are needed to minimize expenses (agency costs, or costs related to contracts) such as the opportunism expenses, information asymmetry expenses, adversary selection costs or moral chance costs. We call internal cession price the transfer, valorization and product exchanges, under products services between responsibility center, benefit center, and division.

Extraits

[...] - the autonomy respect of each center. - the responsibility, motivation and involvement of each center. - to allow the leaders to make reorganization decisions. This approach can be seen as positivist since it estimates that there is a " one best way " to obtain good results and that it presupposes well delimited borders between the organization and its environment. The valorization of internal cessions can be done in two different ways: - either by cost, - or by price. [...]

[...] In this case, the firm can't take the liberty of putting its centers or divisions in competition with the outside because it would put back in cause its existence. Conclusion It is necessary to adapt the MICP to each type of organization which must be strongly linked up with the aim and strategical purpose of the firm so as to be coherent. The opportunism cost and opportunism price can't be thought of without taking in charge opportunism earnings that's to say short term and long- term direct and indirect strategical and organizational consequences of any cogitation on a possible externalization. [...]

[...] Take into account as the internal cession price only the additional variable cost is not an appropriate solution since it doesn't insert costs or fixed expenses. According to the situation the internal cession price will take a different form ) By the opportunism cost The opportunism cost is caused by the choice of internal performance, it represents the difference between the internal cession price and the market price. It would be relatively important to be able to value the opportunity earnings. [...]

[...] Cooperative style: The organization is very integrated but not very diversified; its aim is to make profitable the heavy investments. It must set up an internal collaboration's strategy. Participative type: It is a very diversified and integrated organization (rather rare). Internal stocking-up is favoured but it is systematically put in competition with the market. We will set up an internal strategy of competitive participation linked to a participative direction by aims. Single-product firm: It corresponds in a not diversified and not inserted diversification. It's often the case of the small and medium firms. [...]

[...] The aim is to minimize the transaction costs. Agency theory and conventions theory also bring into question the means that are needed to minimize expenses (agency costs, or costs related to contracts) as the opportunism expenses, information asymmetry expenses, adversary selection costs or moral chance costs. (see theory of organizations lesson). Pragmatic approach (firm's practitioners ) tries to determine how to optimize expenses by asking the following question: to make or to make made? We call internal cession price the transfer valorization and product exchanges, under products services between responsibility center, benefit center, division . [...]