Why is a long-term contract preferable to a spot exchange or vertical integration between Yan’an and Air Liquide?

The remaining 10 to 30 percent in cost reduction accrues from consolidated operations. Suppose you are the manager of a U.S.-based company and must decide whether to outsource your human resources department.
January 4, 2018
75 per hour on July 24, 2017. Discuss the implications of this legislation for your company’s operations and in particular the implications for your optimal mix of inputs and long-run investment decisions?
January 4, 2018

Why is a long-term contract preferable to a spot exchange or vertical integration between Yan’an and Air Liquide?

Recently, Air Liquide signed a long-term contract with Yan’an Energy and Chemical Co., a subsidiary of Yanchang Petroleum Group-one of China’s largest firms engaged in oil and natural gas exploration and production as well as oil refining. The new contract specifies that Air Liquide invest approximately 80 million euros in two air separation units (ASUs), which will supply air gases for Yan’an’s production of plastics. Air Liquide is a French multinational firm that supplies industrial gases to a wide range of industries, including chemical manufacturers. Why is a long-term contract preferable to a spot exchange or vertical integration between Yan’an and Air Liquide?

 

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