프라임브로커와 헤지펀드
프라임브로커와 헤지펀드   프라임브로커는 헤지펀드에 어떠한 영향을 미치는가   고려대 경영대 정지웅 교수와 홍콩 이공대 강병욱 교수의 공동 연구인 'Prime Broker-Level Comovement in Hedge Fund Returns: Information or Contagion?'가 <Review of Financial Studies>에 게재됐다. 아래는 저자인 정지웅 교수가 논문을 직접 요약한 것이다.     프라임브로커는 헤지펀드 산업에서 없어서는 안될 금융중개기관이다. 단순히 고객의 주문을 대신 체결해주는 일반 브로커들과는 달리 프라임브로커는 주식 대여, 자금 지원, 매매 체결과 관리 및 결제, 리스크 관리 등 다양한 서비스를 주고객인 헤지펀드들에게 제공한다. 혹자는 프라임 브로커와 헤지펀드의 관계를 결혼에 비유하기도 하고, 프라임브로커 없이는 헤지펀드의 운용이 불가능하다고 말을 해도 과하지 않다. 우리나라도 법적으로 헤지펀드 운용이 허용된 200년대 중반이후, 업계와 감독당국에서 프라임브로커 산업의 육성을 위한 많은 노력을 펼치고 있다.   본 연구에서는 이렇게 중요한 역할을 하고있는 프라임브로커가 헤지펀드의 행태에 어떠한 영향력을 미치는지에 대한 분석을 하였다. 논문의 전반부에서는 같은 프라임브로커를 사용하고 있는 헤지펀드들 간에 수익률 동조현상(Co-movement)이 있다는 것을 발견하고 후반부에서는 이러한 동조현상이 생기는 원인을 찾고자하는 분석을 하였다.    수익률 동조현상이 발견이 되는 원인에 대한 여러 가지 가설들을 검증을 하였는데, 결론부터 말하자면, 동조현상의 대부분이 같은 프라임브로커로부터 제공이 되는 투자정보에 기인한 것으로 나타났다. 프라임브로커는 내부 리서치를 통해 또는 자신들의 네트워크를 이용하여 다양한 투자기회를 포착하고 이 정보를 헤지펀드 고객들에게 공유할 수 있는데, 이러한 산업 관행이 고객 헤지펀드들 사이에 수익률 동조를 일으키는 것이다. 그리고 동조가 강한 편드들의 경우 수익률이 높게 나타났다. 물론 이러한 투자정보 생성 또는 습득 과정을 저자가 직접적으로 관찰할 수 없고, 또한 이러한 정보가 합법적으로 습득이 된 것인지도 알 수는 없다.   동조현상의 또 다른 원인으로 생각해볼 수 있는 것은, 프라임브로커가 헤지펀드 고객들을 "공통적인 리스크"에 노출시키기 때문일 수도 있다는 것이다. 금융위기 초반에 리만브라더스(Lehman Brothers)가 ㅏ산을 하면서 리만브라더스를 프라임브로커로 사용하고 있던 많은 헤지펀드들의 수익률이 동시에 하락하는 현상이 발견이 되었다. 이는 리만브라더스가 자금조달을 고객들에게 제대로 하지 못하게 되는 상황이 되자, 고객 헤지펀드들이 의도치 않게 자산을 헐값에 매도함으로써 수익률이 악화된 것으로 해석이 된다. 하지만 본 연구의 분서에 따르면 이러한 유동성 문제가 위기 상황에서의 동조현상을 일정 부분 설명할 수는 있지만, 정상적인 상황 하에서의 동조현상을 설명하기에는 부족하다는 것이었다.   본 연구는 헤지펀드의 형태에 있어 프라임브로커가 어떠한 영향을 미치는지에 대한 단순한 발견을 넘어서 헤지펀드 산업에 있어 프라임브로커에 대한 관리 감독이 중요할 수 있다는 정책적 시사점을 제시한다. 헤지펀드 산업의 시스템리스크 관리 및 불법적인 거래 관행들을 감독하기 위해 감독당국이 프라임브로커에 초점을 맞추는 것이 도움이 될 것으로 보인다.
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The relationship between corporate diversification and corporate social performance
The relationship between corporate diversification and corporate social performance   Jingoo Kang Korea University Business School     Does diversification affect firm response to stakeholder demands and social issues? Despite extensive interest in corporate diversification in the strategy literature, the relationship between diversification and corporate social performance (CSP) remains largely unexplored. Bothe product and geographic diversification increase the range of stakeholder demands and social issues that firms face. In addition, according to findings of the diversification and stakeholder management literature, diversified firms have several reasons to respond to increasing stakeholder demands and social issues. Based on these observations, i propose that the level of diversification will be positively related to the CSP of firms. However, when diversified firms have a strong focus on short-term profit, it may discourage firm response to stakeholder demands and investment in social issues, thereby negatively moderating the positive relationship between the level of diversification and CSP. The sample for this study starts from 1,000 of the largest US firms in terms of market capitalization. I chose large firms for my sample because these firms are more likely to pursue diversification, both product-wise and geographically. The social performance date for sample firms were collected from the Kinder, Lydenberg, Domini (KLD) Social Ratings database, which is a popular source of CSP measure in academic research. To construct other explanatory and control variables, I collected financial data from Compustat's North America database and Compustat's Executive Compensation (Execucomp) database. Since the Execucomp database provides data from 1993 to 2006, the sample period is limited, accordingly. After the three databases were matched, the effective sample size was reduced to 511 firms. The effective sample size in the analysis was 3,044 observations. Empirical testing shows that the levels of unrelated and international diversification have a positive relationship with CSP, and that strong short-term profitability of diversified firms partially and negatively moderates the positive relationship between the level of diversification and CSP.   Strategic Management Journal Volume 34, Issue 1, pages 94109, January 2013
2013.03.15
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Pay for Performance from Future Fund Flows: The Case of Private Equity
Pay for Performance from Future Fund Flows: The Case of Private Equity   Ji-woong Chung Korea University Business School     The incentives of private equity general partners to create value for their investors (limited partners) are often questioned by investors, industry observers, and academics alike. Critics allege that pay-for-performance incentives from the carried interest profit share (typically 20%) are muted when funds fall short of their hurdle rates, and because fixed fees alone represent a substantial source of income for many private equity groups.     In this paper, we point out that the direct incentives from carried interest are only part of the total pay-for-performance incentives that general partners have. The other part is the indirect, market-based incentives that arise from the fact that general partners’ ability to raise capital for new funds in the future, and so to earn income from managing that capital, depends on the performance of their current funds.     To better understand general partners’ motivations, it is essential to have a complete picture of their total pay for performance incentives, which is the sum of the direct effect of current performance on earnings from carried interest, and the indirect effect of current performance on earnings from managing future funds.     Our goal is to quantify the latter effect, and compare its magnitude to the former. To do so, we present a rational learning model that formalizes the logic by which good performance in the current fund could lead to higher future incomes for general partners through an effect on expected future fundraising.     The model provides us with an explicit formula for indirect pay-for-performance from future fundraising as a function of i) expected sizes of future funds, consisting of the probability of raising a future fund and its expected size if there is one, ii) the sensitivities to current performance of the likelihood of a general partner raising another fund, and its size if there is one, and iii) expected general partner compensation per dollar of fund size.     The model also provides us with several cross sectional predictions about the magnitude of the sensitivity of future fundraising to current performance that have not been previously tested in the private equity literature, and that in our framework translate directly into cross-sectional differences in indirect pay for performance incentives. The first prediction is that for a given assessment of a general partner’s ability to generate returns, the more ‘’scalable’’ abilities are, the more investors are willing to put money into a following fund. To the extent that buyout funds are more scalable than venture capital funds, future fundraising-performance sensitivity should be greater for buyout funds than for venture capital funds. The model also predicts that as a partnership ages, so its ability is known with more precision, performance in a given fund should have less incremental impact on the market’s overall assessment of the partnership’s ability. This means that future fundraising should be more sensitive to performance for younger partnerships than for older ones. Finally, the model predicts that for a given performance, a manager is more likely to raise a subsequent fund if the prior assessment of his ability is better. It implies that later sequence funds should be more likely to raise a follow-on fund because the average assessment of ability will be higher in later sequence funds than in earlier ones, for the simple reason of their survival.     Using a sample of buyout, venture capital, and real estate private equity funds from Preqin over 1993-2010, we find support for all of these predictions. Importantly, there are three main takeaways from the estimates of direct and indirect pay-for performance. First, indirect pay for performance is sizeable and of the same order of magnitude as direct pay for performance from carried interest. Second, indirect pay for performance is much stronger for buyout funds than for venture capital funds, with real estate in between. Third, it becomes weaker as a partnership ages and manages more funds. The magnitude is reduced by more than half for a fifth-fund buyout partnership compared to a new partnership, and for venture capital there is essentially no indirect pay for performance beyond the fourth fund.   Review of Financial Studies, Volume 25, Issue 11, pp. 3259-3304, November, 2012
2013.03.15
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Effects of Disclosure Quality on Market Mispricing: Evidence from Derivative- Related Loss Announcements
Effects of Disclosure Quality on Market Mispricing: Evidence from Derivative- Related Loss Announcements   Jaiho Chung Korea Universicty Business School     It is well understood that investors require value-relevant information on a firm’s future profitability and risks to assess its equity value correctly. However, information asymmetries and agency problems prevent managers from providing investors with value-relevant information in an effective manner. One solution to this problem is to require managers to fully disclose their private information. In fact, one of the main purposes of regulating corporate disclosure is to increase the amount of value-relevant information available to the public on a timely basis. Although previous studies have generally suggested that the level of disclosure is positively related to stock market efficiency, it remains unclear whether an increase in the amount of information (regardless of its quality) can guarantee a better-functioning stock market. This is because such studies have not explicitly differentiated amount from quality when measuring the level of information provided in disclosures. Our study fills this gap in the literature by providing a direct analysis of the relationship between disclosure quality and the market’s mispricing of disclosed information.     We focus on the Korean stock market, which provides a unique empirical setting allowing us to differentiate clearly between high-quality disclosure and low-quality disclosure. Recently, Korean exporters hedged against foreign exchange risk using knock-in/knockout (KIKO) option contracts (over-the-counter instruments). Some firms maintained an over-hedged position through their KIKO contracts and thus incurred enormous amounts of derivative-related losses when the Korean won depreciated sharply against the U.S. dollar during the second half of 2008. In contrast, non-over-hedged firms with derivative related losses are just hedging against the foreign exchange risk associated with their underlying export contracts or other assets denominated in a foreign currency, and thus such losses should be offset by corresponding gains from those contracts or assets. Since the Korean regulations require a timely disclosure of such derivative-related losses (but not the offsetting gains from underlying foreign currency position) within two business days upon recognition, such loss disclosure may occur well before the release of corresponding quarterly financial statements, which contain the information necessary for differentiating over-hedged firms from non-overhedged firms. We propose that stock market should react negatively upon disclosure only for overhedged firms when not only derivative-related losses but also quarterly financial statements are disclosed at the same time.     We compare the stock market’s responses to the full-disclosure and incomplete-disclosure groups following 131 derivative-related loss announcements in Korea from March 2008 to June 2009 where we classify the announcement of derivative-related losses by firms issuing quarterly financial statements at approximately the same time as “full disclosure” (i.e., high-quality disclosure) and that by firms issuing the statements at a later date as “incomplete disclosure” (i.e., low quality disclosure). Our results indicate that for the full-disclosure group, market’s initial reactions to derivative – related losses are negative only for over-hedged firms, but not for non-over-hedged firms supporting our hypothesis. In contrast, for the incomplete-disclosure group, investors’ initial reactions are negative not only for over-hedged firms, but also for non-overhedged firms. Moreover, within the incomplete disclosure group, we find that investors correct their mispricing of derivative related losses for nonover-hedged firms when quarterly financial statements become available at a later date. These results suggest that an increase in the amount of information may not necessarily facilitate a more rational assessment of firms’ equity value. To the contrary, a simple increase in the amount of low-quality information might actually lead to greater market mispricing.   Jaiho Chung, Hyungseok Kim, Woojin Kim, Yong Keun Yoo, (2012). “Effects of Disclosure Quality on Market Mispricing: Evidence from Derivative-Related Loss Announcements”, Journal of Business Finance and Accounting
2012.09.14
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When thinking about goals undermines goal pursuit
When thinking about goals undermines goal pursuit   Jinhee Choi Korea University Business school     To motivate themselves and others, individuals often attend to the goals an action achieves. When individuals consider the goals they achieve by pursuing the action, for example, increased flexibility through yoga or improved dental health through flossing, their intentions to pursue that activity should rise. However, other, unintended consequences might also arise from attending to goals. In particular, the focus on an activity’s instrumentality can also affect an individual’s experience while pursuing the activity, potentially making this goal- oriented activity seem more demanding. Such unintended consequences may further influence pursuit of the activity beyond forming intentions.     Accordingly, this article explores the distinct impact the emphasis on an activity’s instrumentality has on forming intentions and on actual pursuit of the activity. For example, we ask whether attending to the many benefits of practicing yoga distinctly impacts the intention to start and adhere to a yoga routine. We distinguish between two types of benefits individuals gain from pursuing an activity: internal benefits that come while and are part of pursuing the activity, and external benefits that come at a separate time and define the goals the activity achieves, namely, the activity’ s instrumentality. For example, working out, reading the newspaper, and doing pottery are activities individuals often enjoy pursuing; thus intrinsic benefits derive from pursuing them. But these activities also offer external benefits that materialize after the activities are completed, including staying in shape, being well informed, and having a decorated home. These external benefits constitute the activities’ “goals,” that is, the desired outcomes of performing the activity. When individuals pursue an activity mainly for the sake of pursuing it, the activity is experiential? the intrinsic experience forms its end. When individuals pursue an activity mainly as a means to an end, the activity is instrumental for achieving the end and is extrinsically motivated.     We predict that behavioral intentions increase with attention to goals an activity achieves, because at the point of deliberation, the benefits the activity achieves are salient and the experience of pursuing the activity is not. When individuals form intentions, they wish to evaluate the benefits from pursuing an activity, and information about instrumentality increases their motivation. For example, a person who learns about the benefits of exercising is more likely to be interested in exercising and might even be more likely to sign up for a gym membership than someone who did not receive this information. In contrast, we predict experience weighs more in the actual pursuit of or persistence on an activity than in forming intentions, because experience is salient during pursuit. For example, a gym member’s experience while working out should affect the duration of a single workout or adherence to a workout routine. If she enjoys it, she will stay longer and return more quickly.     In support of our analysis, four studies demonstrate that before one engages in an activity, thinking about goals increases forming intentions more than attending to the positive experience pursuing these goals engenders. However, among those already pursuing an activity, thinking about goals renders the experience less positive and undermines pursuit more than focusing on the experience. These studies utilized a number of activities that vary by their hedonic value, including working out, doing origami, flossing, and practicing yoga. The implications of these findings for adaptive self-regulation are straight forward: to motivate themselves (and others), individuals? prior to engagement? Should better focus on the goals an activity serves and move their attention away from these goals once they are already pursuing them.   Ayelet Fishbach, Jinhee Choi, (2012 ). “When thinking about goals undermines goal pursuit”, Organizational Behavior and Human Decision Processes
2012.09.14
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The Moderating Role of Decision Task Goals in Attribute Weight Convergence
The Moderating Role of Decision Task Goals in Attribute Weight Convergence   SungAh Yoon Korea Unversity Business School     Consumer choice can differ greatly depending on relative importance he or she places on different attribute dimensions (e.g., price or quality). Also, managers rely on consumer’s expressed attribute weight when developing market segmentation and product configuration. Due to such practical importance, issues regarding attribute weight have been studied extensively and a wide range of measurements have been proposed in past research. Some are direct measures (i.e., weights are measured using self-reported rating or self-reported point allocation), whereas others are in direct measures (i.e., weights are statistically derived from the evaluation of product options using different evaluation tasks such as rating, ranking and choice). However, existing research shows only weak to moderate convergences among various direct and indirect measurement techniques. The lack of inter-measurement convergence can be troubling to managers who make important strategic decisions based on different approaches often used interchangeably (Horsky, Nelson, & Posavac, 2004; Kramer, 2007).     In this study we uncover the potential determinant of inter-measurement divergence, thereby help predict the conditions under which attribute weight convergence can improve. Specifically, we posit that processing goals underlying different measurement tasks play important roles. Decision tasks differ in how much a decision maker feels that he or she needs to differentiate an alternative from the other alternatives during an evaluation. In some tasks (e.g., choice), the need for differentiation is high since one has to select one option while giving up on others. In contrast, other tasks (e.g., rating) evoke individual evaluation goal and hence are associated with minimal need for differentiation. The distinction between differentiation and individual evaluation goal is important because it influences consumer’s attribute weighting rule. When evaluation task calls for differentiation processing goal, people tend to assign disproportionately great weights to the most important dimension. On the other hand, tasks characterized by individual evaluation goal are less susceptible to such bias. This difference, in turn, leads to the reduced overall correspondence among the measurements evoking different processing goals.   Our hypotheses are tested in two studies employing a multi-attribute procedure. In the studies, indirect attribute weights are derived from participants’ preferences among the sixteen hypothetical product profiles based on various decision tasks (choice, ranking, rating, inclusion). Direct attribute weights are measured by self-reporting and point allocation. Study 1, in which various compared, shows that weight assignment is a function of type of decision tasks employed in evaluation context. When the product evaluation is made based on the tasks characterized by high differentiation processing goal (choice and ranking), disproportionately greater weight is given to what the evaluator perceives as the most important attribute. This, in turn, leads to the overall divergence with the weights inferred by tasks classified as evoking individual evaluation goal (rating and inclusion). Further, study 2 extends the results to the convergence between direct and indirect measurements. The results show the improved convergence among the measures sharing similar processing goals. Specifically, the maximum inter-measurement convergence was found when both direct and indirect measurements evoke differentiation goal (i.e., point allocation · choice / point allocation-ranking) or individual evaluation goal (i.e., self-repot rating · rating / self-repot rating · inclusion).     The demonstration of convergence between direct and indirect weight assessments has tremendous practical importance for managers. Direct measures are often used in consumer studies to predict weights that are derived indirectly using multi-attribute decision tasks in actual shopping environments. Our findings suggest that a good understanding of the types of decision tasks that consumers use most when evaluating their products in the actual market place, and then incorporating this knowledge when designing self-reported evaluation measures in their market research can greatly enhance the value of their study. For instance, when the shopping environment presents a decision mode that prompts the goal of distinguishing one option from others (e.g., Expedia.com), the use of point allocation or other non-zero sum evaluation methods would enhance the prediction validity of the market research. Conversely, if the purchasing environment presents an evaluation task that activates the goal of individual evaluation (e.g., Pricaline.com), direct importance ratings would yield better predictions.
2012.06.15
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The effect of board structure on firm value: a multiple identification strategies approach using Korean data
The effect of board structure on firm value: a multiple identification strategies approach using Korean data   Woochan Kim Korea Unversity Business School     A minimum number of outside directors (perhaps a majority), and an audit committee staffed principally or solely by outside directors, are standard corporate governance prescriptions. Both are prescribed by law in many countries, and are central components of most “comply or explain” corporate governance codes. Yet empirical strategies that can address the likely endogeneity of governance and let us assess how these prescriptions affect firm value are often not available.     The Principal advance in this paper is to use a legal shock to governance as a basis for identification for a connection between board structure and firm market value, peroxided by Tobin’s q. In 1999, in response to the 1997-1998 East Asian financial crisis, Korea adopted governance rules, effective partly in 2000 and partly in 2001, which require "large" firms (assets greater than 2 trillion won, around $2 billion) to have 50% outside directors, an audit committee with an outside chair and at least two-thirds outside members, and an outside director nominating committee. Smaller firms must have 25% outside directors.     Prior papers that seek to address endogeneity include Wintoki, Linck, and Netter (2009), who use Arellano-Bond “internal” instruments and find no connection between board composition in the US. Dahya and McConnell (2007) report that UK companies which comply with the voluntary Cadbury Committee recommendation to have at least three nonexecutive directors experienced improved performance. Black, Jang and Kim (2006a), a predecessor to this paper (henceforth BJK), use the same legal shock as we do and find that firms subject to these rules have higher Tobin’s q’s than smaller firms. BJK use cross-sectional data from 2001. Un contrast, we build a panel data set which includes board structure data from 1996-2004 and full governance data from 1998-2004, covering almost all public companies listed on the Korea Stock Exchange (KSE). We seek to identify a change in the market value of large firms, relative to mid-sized firms, both in size (is 2-trillion-won threshold) and in time (does the value of large firms jump when the reforms are announced). We conduct event study and difference-indifference (DiD) estimation of the effect of adopting of these rules, with large firms as the treatment group and mid-sized firms as the control group. We support the event study and DiD analyses with instrumental variable (IV) analyses. We report consistent evidence across approaches for a connection between board structure (outside directors and audit committees) and firm market value. A central empirical challenge is to assess whether large firms rose in value for reasons unrelated to the legal shock. We do so in a number of wats. First, we use a regression regression discontinuity framework to control for a possible continuous effect of firm size on firm market value. Second, the share prices and Tobin’s q’s of large firms jump relative to mid-sized firms when they should during the mid-1999 period when the main legislative events occur. Third, we find no near-term changes in large firms’ profitability or growth which might explain the 1999 jump. Fourth, we conduct event studies in six comparable East Asian countries and find no evidence that large firms outperform mid-sized firms there during our event period. Fifth, smaller firms which voluntarily adopt the principal reforms have similar value increases to those we observe for large firms.     The estimated effects are economically important. In our event study, large firms' share prices rise by an average of 15% relative to mid-sized firms over a broad window covering our principal events. Our DiD results suggest a roughly 0.13 increase in ln(Tobin's q) from June 1, 1999 through the end of 1999 this period captures the full legislative process).
2012.06.15
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Internet Channel Entry: A Strategic Analysis of Mixed Channel Structures
Internet Channel Entry: A Strategic Analysis of Mixed Channel Structures   Weon Sang Yoo Korea University Business School      Despite the rapid growth and exciting potential of emerging marketing channels such as the Internet, finding the best way to utilize them in conjunction with the conventional bricks-and-mortar store channel continues to be a challenge for many firms. For example, Levi Strauss & Co. discontinued its direct Internet channel at http://www.levis.com and http://www.dockers.com and handed online sales over to a few select e-retail partners. In the personal computer market, Gateway closed all of its manufacturer-owned retail stores in 2004 and now distributes its products through its direct Internet channel and independent retailers such as Best Buy and Costco. In contrast, Dell has added its full-scale manufacturer-owned stores to its existing direct Internet channel since the second half of 2006. These anecdotes point to the need for a better understanding of the impact of the introduction of an Internet channel in a variety of mixed channel structures.     This study explores the following questions using the game theoretic approach: 1. When the Internet channel is added to an existing channel system, how does it affect each channel member’s performance and consumer welfare? How is this effect moderated by the specific channel structure before and after the Internet channel launch? 2. What are the key underlying forces that shape the impact of the Internet channel introduction? 3. How do varying market conditions affect the impact of the Internet channel introduction?     By analyzing a game-theoretic model that explicitly captures the store channel and the Internet channel in two different dimensions, this study has investigated how the introduction of an Internet channel affects the channel members and consumers. We have also demonstrated that the impact of an Internet channel introduction not only differs from the impact of a physical store entry but also varies considerably across channel structures and market conditions. Out of the complex results, we have identified five key strategic forces that shape the overall impact of the Internet channel introduction. They are double marginalization effect, market coverage effect, retailer competition effect, price discrimination effect, and myopic inter-channel price coordination effect. Each of the five underlying forces is intuitively appealing, but in combination, they can produce unexpected results under certain conditions. For instance, we find that the addition of an Internet channel does not always lead to lower prices and enhanced consumer welfare, that an existing physical store retailer might react to the competitive entry of the Internet channel by raising its price, and that a horizontally integrated mixed channel retailer might be worse off with inter-channel coordination in pricing.   For marketing managers, this study highlights the key moderating role of channel structure and market environment on the impact of the Internet channel entry. Since the impact can vary substantially depending on whether it is introduced by the manufacturer, the existing retailer, or a new independent e-tailer, the key strategic question is not only whether to introduce an Internet channel but also how. In addition, it will be critical for manufacturers to discern the relationship between market conditions and the strategic role of each channel (e.g., a mass market channel versus a niche channel). Similarly, retailers facing new competition from an Internet channel will have to strategically decide whether to try to maintain its market share, settle for an even split of the market, or substantially narrow its target market scope to remain profitable.
2012.03.15
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