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Exam 8: Corporate Strategy: Vertical Integration and Diversification

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Question 51

Multiple Choice

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Which of the following is an example of an internal transaction cost?

A) the cost of searching for a contract manufacturer
B) the cost of signing a contract with a supplier
C) the cost of buying raw materials
D) the cost of maintaining a production unit

E) All of the above
F) A) and C)

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Question 52

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Ancho Corp. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car, which uses both gas and electricity. In this scenario, Ancho is primarily

A) leveraging new core competencies to improve current market position.
B) redeploying existing core competencies to compete in future markets.
C) unlearning existing core competencies to create and compete in markets of the future.
D) building new core competencies to protect and extend current market position.

E) B) and C)
F) All of the above

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Question 53

Multiple Choice

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Using the Boston Consulting Group growth-share matrix, the managers of Xylicon International determined that their business unit devoted to personal health monitoring devices was a star. Based on this finding, which of the following strategies is likely to produce the best results?

A firm follows a(n) ________ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.

What are the advantages and disadvantages of organizing economic activity within firms?

Managers have exactly two choices when determining the boundaries of the firm: produce goods and services in-house ("make") or purchase them externally ("buy").

What are the three types of specialized assets?

The most challenging diversification strategy is likely to be one that combines new core competencies with new and emerging markets.

Decisions relating to the range of products and services a firm will offer determine the firm's

In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of

________ is best described as a situation in which one party is more informed than another, because of the possession of private information.

Anita has been named CEO of a popular sports apparel company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Anita most likely to make?

Phoenix Guitars is interested in pursuing backward integration to take greater ownership of the extraction of raw materials and production of components used in its signature line of guitars. Although this approach would lower the overall cost of producing a guitar, the costs associated with producing electronic pickups for sound amplification are far greater than those associated with sourcing pickups from a reliable supplier. Which of the following approaches is likely to produce superior results?

Royal Motor Corp. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Royal Motor Corp.?

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale?

Sending jobs out of the country to lower costs is known as outsourcing.

The Martinez Legal Firm (MLF) recently acquired a smaller competitor, Miller and Associates, which specializes in issues not previously covered by MLF, such as land use and intellectual property cases. Given the increase in the firm's size and complexity, it is likely that its internal transaction costs will

WellMade Manufacturing is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate?

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

Best Burger is a major fast food chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth?