34) The difference between a merger and an acquisition relates to
A) strategy and competitive advantage.
B) the presence of available resources and competitive capabilities.
C) whether the end result is related to horizontal or vertical scope.
D) creating a more cost-efficient operation out of the combined companies.
E) the details of ownership, management control, and the financial arrangements.
35) A strategic objective that is highly UNLIKELY to drive a mergers and acquisition strategy is
A) to gain quick access to new technologies or other resources and capabilities.
B) to create a more cost-efficient operation out of the combined companies.
C) to expand a company’s geographic coverage.
D) to facilitate a company’s shift from a broad differentiation strategy to a focused differentiation
strategy.
E) to extend a company’s business into new product categories.
36) In the face of strong competition from Amazon, Walmart’s 2016 acquisition of Jet. com was
driven by a strategic objective, such as
A) expanding its geographic coverage or extending its business into new product categories.
B) reducing the number of industry key success factors.
C) reducing the number of strategic groups in the industry.
D) facilitating its shift from a low-cost leadership strategy to a focused low-cost strategy.
E) lengthening its value chain and thereby putting it in a better position to deliver superior value
to buyers.
37) Merger and acquisition strategies
A) are nearly always superior alternatives to forming alliances or partnerships with these same
companies.
B) may offer considerable cost-saving opportunities and can also be beneficial in helping a
company try to invent a new industry.
C) are a particularly effective way of pursuing a blue-ocean strategy and an outsourcing strategy.
D) seldom are superior alternatives to forming alliances with these same companies because of
the financial drain of using the company’s cash resources to accomplish the merger or
acquisition.
E) are one of the best ways for helping a company strongly differentiate its product offering and
use a differentiation strategy to strengthen its market position.
38) Choose the intended outcome that did not happen with Expedia’s merger and acquisition of
HomeAway, Inc.
A) Expedia’s geographic coverage expanded.
B) Expedia was provided with quick access to new technologies or complementary resources and
capabilities.
C) Expedia was able to lead the convergence of the travel and vacation rental industries, whose
boundaries are being blurred by changing technologies and new market opportunities.
D) Expedia’s business extended into new product categories.
E) Expedia suppressed its rival company Orbitz’s breakthroughs in management or technology.
39) Mergers and acquisitions
A) are nearly always successful in achieving their desired purpose.
B) frequently do not produce the hoped-for outcomes.
C) are generally less effective than forming alliances or partnerships with these same companies.
D) are highly risky because of the financial drain that comes from using the company’s cash
resources to pay for the costs of the merger or acquisition.
E) are usually more successful in achieving cost reductions than in expanding a company’s
market opportunities.
40) A primary reason why mergers and acquisitions sometimes fail is due to the
A) misinterpretation of the cultural differences, like employee disenchantment and low morale,
differences in management styles and operating procedures, and operations integration decision
mistakes.
B) execution of functional and integration activity, while sustaining and capitalizing on the
combined sources of revenue.
C) development of effective integration plans conducive to employee satisfaction.
D) advertising message detailing the merger announcement.
E) creation of management-employee programs in order to foster better communication.
41) Why do mergers and acquisitions sometimes fail to produce anticipated results?
A) The hoped for outcomes and changes to existing operations may not eventuate.
B) Cost savings are equal or better than expected.
C) Gains in competitive capabilities quickly materialize.
D) Efforts to mesh corporate cultures go smoothly.
E) Key employees at the acquired company can quickly become disenchanted and leave.
42) Vertical integration strategies
A) extend a company’s competitive scope within the same industry by expanding its operations
across multiple segments or stages of the industry value chain.
B) are one of the best strategic options for helping companies win the race for global market
leadership.
C) offer good potential to expand a company’s lineup of products and services.
D) are particularly effective in boosting a company’s ability to expand into additional geographic
markets, particularly the markets of foreign countries.
E) are a good strategy option for helping a company revamp its value chain and bypass low
value-added activities.
43) The best reason for investing company resources in vertical integration (either forward or
backward) is to
A) expand into foreign markets and/or control more of the industry value chain.
B) broaden the firm’s product line and/or avoid the need for outsourcing.
C) gain a first-mover advantage over rivals in revamping the industry value chain.
D) add materially to a company’s technological capabilities, strengthen the company’s
competitive position, and/or boost its profitability.
E) achieve product differentiation and/or lengthen the company’s value chain to include more
activities performed in-house and thereby gain a greater ability to reduce internal operating costs.
44) A good example of vertical integration is a
A) global public accounting firm acquiring a small local or regional public accounting firm.
B) large supermarket chain getting into convenience food stores.
C) crude oil refiner purchasing a firm engaged in drilling and exploring for oil.
D) hospital opening up a nursing home for the aged.
E) railroad company acquiring a trucking company specializing in long-haul freight.
45) A vertical integration strategy can expand the firm’s range of activities
A) backward into sources of supply and/or forward toward end users.
B) backward into other industry business lines and/or forward to suppliers of raw materials.
C) to enable the supply chain the opportunity for expansion.
D) to complement the industry’s horizontal value chain line of profitability.
E) to establish full integration by participating in a tapered integration (without the outsourced
and in-house activities).
46) The two most compelling reasons for a company to pursue vertical integration (either
forward or backward) are to
A) strengthen the company’s competitive position and/or boost its profitability.
B) achieve product differentiation and/or lengthen the company’s value chain to include more
activities performed in-house and thereby gain greater ability to reduce internal operating costs.
C) broaden the firm’s product line and/or avoid the need for outsourcing.
D) expand into foreign markets and/or control more of the industry value chain.
E) enable use of offensive strategies and/or gain a first-mover advantage over rivals in
revamping the industry value chain.
47) For backward vertical integration into the business of suppliers to be a viable and profitable
strategy, a company
A) must first be a proficient manufacturer.
B) must be able to achieve the same scale economies as outside suppliers and match or beat
suppliers’ production efficiency with no drop-off in quality.
C) must have excess production capacity so that it has an ample in-house ability to undertake
additional production activities.
D) needs to have a wide product line, so it can supply parts and components for many products.
E) should have a distinctive competence in production process technology and at least a core
competence in manufacturing R&D.
48) The hallmarks of Tesla’s vertical integration strategy do not include
A) investments in a “gigafactory” that manufactures the batteries that are essential for a long-
lasting Tesla electric vehicle.
B) research and development and rapid deployments of Tesla’s control integration systems
(creating control factors across its entire value chain).
C) in-house manufacturing of key components and new parts that require frequent updates
resulting in a shorter learning curve and more rapid new Tesla vehicle development
D) fostering closer relationships between Tesla engineering and manufacturing departments to
provide greater control over product design.
E) a network of dealerships that allows Tesla to sell directly to consumers and handle
maintenance needs without relying on third parties that sometimes have competing priorities
49) The potential advantages of Tesla’s backward vertical integration strategy include
A) increased vulnerability to Tesla from powerful suppliers (who may be inclined to raise prices
at every opportunity).
B) moderately increased risks to Tesla of disruptions in obtaining crucial components or support
services.
C) reduced costs.
D) increased business risk for Tesla because it can control a larger portion of the overall industry
value chain.
E) enhancement of Tesla’s differentiation capabilities and perhaps achieving a differentiation-
based competitive advantage.
50) Backward vertical integration can produce a
A) full integration when activities remain the domain of key suppliers.
B) tapered integration if the firm consolidates all activities in-house.
C) differentiation-based competitive advantage when activities enhance the performance of the
final product.
D) focused differentiation strategy when the market is broad and the product is a commodity.
E) lower degree of flexibility in accommodating shifting buyer preferences.
51) The strategic impetus for forward vertical integration is to
A) gain better access to end users and better market visibility.
B) achieve the same scale economies as wholesale distributors and/or retail dealers.
C) control price at the retail level.
D) bypass distributors and dealers and sell direct to consumers at the company’s website.
E) build a core competence in mass merchandising.
52) The strategic impetus for Tesla’s forward vertical integration into dealerships and charging
stations is
A) being able to control the wholesale/retail portion of the automobile industry value chain.
B) experiencing fewer disruptions in the delivery of the company’s vehicles to end users.
C) gaining better access to Tesla’s end users and better market visibility.
D) broadening Tesla’s product line.
E) providing Tesla with access to resources and capabilities to achieve greater economies of
scale.
53) A strategic disadvantage of vertical integration is
A) to boost a firm’s capital investment in the industry, thus increasing business risk if the
industry becomes unattractive later.
B) to impair a company’s operating flexibility when it comes to changing out the use of certain
parts and components.
C) to impair a company’s flexibility in accommodating shifting buyer preferences.
D) to require radically different skills and business capabilities than the firm possesses.
E) to speed up the company’s adoption of technological advances.
54) The best example of forward vertical integration is
A) Amazon Studios and Netflix Originals that produce high-quality original content for their
digital streaming services.
B) Harley-Davidson and Ducati’s own-branded stores that sell motorcycles and related
memorabilia.
C) Spanish clothing maker Inditex’s textile design and manufacturing capabilities for its Zara
brand.
D) Apple Inc.’s advanced semiconductor design and manufacturing capabilities for its iPhones.
E) International Paper’s investments into pulp mills near its paper mills.
55) Bypassing regular wholesale/retail channels in favor of direct sales and Internet retailing can
have appeal if it
A) reinforces the brand, enhances consumer satisfaction, and results in lower prices to end users.
B) can result in better coordination of the firm’s direct sales activity to wholesalers and
distributors.
C) can establish a retail frontal attack while efficiently managing its backward (defensive) sales
orientation.
D) combines the best of all sales channels and provides financial support to distribution allies.
E) creates a channel conflict, thereby providing competitive improvisation.
56) A strategy of vertical integration can have substantial drawbacks, including
A) whether horizontal integration can limit the performance of strategy-critical activities in ways
that increase cost, build expertise, protect proprietary know-how, or increase differentiation.
B) raising the firm’s capital investment in the industry and increasing business risk, as well as
providing less flexibility in accommodating shifting buyer preferences by locking the firm into
relying on its own in-house activities.
C) the environmental costs of coordinating operations across vertical chain activities.
D) loss of technological know-how.
E) the difficulties faced in entering outside vertical and horizontal markets.
57) For a backward vertical integration strategy into the business of suppliers to be viable and
profitable, a company must possess
A) the capability to achieve the same scale economies as outside suppliers and also match or beat
suppliers’ production efficiency with no drop in quality.
B) considerable expertise in supply chain management, transportation logistics, and inventory
control techniques.
C) large state-of-the-art production facilities so that it can fully capture all economies of scale in
producing parts and components.
D) a distinctive competence in production process technology and at least a core competence in
manufacturing R&D.
E) excess production capacity so that it has an ample in-house ability to undertake additional
production activities.
58) An outsourcing strategy
A) is nearly always a more attractive strategic option than merger and acquisition strategies.
B) carries the substantial risk of raising a company’s costs.
C) carries the substantial risk of making a company overly dependent on its suppliers.
D) increases a company’s risk exposure to changing technology and/or changing buyer
preferences.
E) involves farming out certain value chain activities presently performed in-house to outside
vendors.
59) The two big drivers of outsourcing are
A) an increased ability to cut R&D expenses and an increased ability to avoid the problems of
strategic alliances.
B) that outsiders can often perform certain activities better or more cheaply, and outsourcing
allows a firm to focus its entire energies on those activities that are at the center of its expertise
(its core competencies).
C) a desire to reduce the company’s investment in fixed assets and the need to narrow the scope
of the company’s in-house competencies and competitive capabilities.
D) the ability to avoid capital investments that accompany vertical integration and a desire to
reduce the company’s risk exposure to changing technology and/or changing buyer preferences.
E) that a smaller in-house workforce and a low investment in intellectual capital will produce
cost savings.
60) Outsourcing strategies
A) are nearly always a more attractive strategic option than merger and acquisition strategies.
B) carry the substantial risk of raising a company’s costs.
C) carry the substantial risk of making a company overly dependent on its suppliers.
D) increase a company’s risk exposure to changing technology and/or changing buyer
preferences.
E) involve farming out value chain activities presently performed in-house to outside specialists
and strategic allies.
61) The following are good examples of outsourcing some value chain activities that were
formerly performed in-house except
A) IBM performs information technology services for Colgate-Palmolive.
B) Luxottica manufactures glasses for Dolce & Gabbana.
C) Nordstrom retails certain products for Coach Inc.
D) Foxconn manufactures the iPad and iPhone for Apple Inc.
E) Paychex performs HR services for Robert Half Financial & Accounting.