Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 08 Corporate Strategy: Vertical Integration and
Diversification Answer Key
Multiple Choice Questions
1.
Amazon.com has decided to enter the college bookstore market. The goal of "Amazon
Campus" is to offer co-branded university-specific web sites that offer textbooks and
paraphernalia, such as logo sweaters and baseball hats. This development shows
Amazon's relentless pursuit of
2.
Decisions relating to "what stages of the industry value chain to participate in" determine
a firm's
3.
Which of the following stakeholders of a company would most likely be responsible for
formulating a corporate strategy?
4.
Which of the following statements is true of transaction costs?
5.
Which of the following is an example of an external transaction cost?
6.
Which of the following is an example of an internal transaction cost?
7.
Which of the following statements is true of internal transaction costs?
8.
A primary advantage of organizing economic activity within firms is the
9.
Grace Apparel Inc. has decided to procure fabrics required for its garments from external
suppliers instead of maintaining its own dyeing and weaving facilities. How will this
decision affect the firm?
10.
Managers in a firm hired to improve the firm's profitability and ultimately the shareholders'
value will add to the overall costs if they pursue their own self-interests. What does this
best illustrate?
11.
The most efficient way to overcome the principal-agent problem in a firm is to
12.
_____ is best described as a situation in which one party is more informed than another,
because of the possession of private information.
13.
In the market for used cars, which of the following is a reason behind the crowding out of
desirable cars by lemons or inferior ones?
14.
Chao is in an interview for a sales job that requires no experience. He is trying to portray
himself as a highly enthusiastic, energetic person with high-level communication and
interpersonal skills. The interviewer is convinced that Chao should be hired as a
salesperson in the company. However, in his resume, Chao had not mentioned his
previous work experience as he was fired from that job because he used illegal drugs.
Which of the following does this scenario best illustrate?
15.
When approaching a bank for a loan, the borrower has better knowledge than the lender
about his or her own ability to repay the loan without defaulting. What is this situation
referred to as?
16.
A drawback of short-term contracting as an alternative to making a component in-house is
that
17.
Which of the following firms is least integrated?
18.
_____ are best described as voluntary arrangements between firms that involve the sharing
of knowledge, resources, and capabilities with the intent of developing processes,
products, or services to lead to competitive advantage.
19.
_____ is best described as a form of long-term contracting in the manufacturing sector
that enables firms to commercialize intellectual property.
20.
Hitoro Inc. developed a superior touch screen technology for tablet computers that
enabled multiple users to operate the screen at the same time. The technology was leased
to Revox Inc., a consumer electronics company, for five years. Which of the following
alternatives to integration does this best illustrate?
21.
Silver Weave Inc., an apparel company, operates through a business model in which
individuals can buy the rights to set up Silver Weave stores and sell the company's
merchandise in return for a lump sum fee at the beginning of the contract and a
percentage of revenues every month. The owners of the stores have to stock the collection
approved from the company's headquarters and also maintain consistent customer service
as expected in its flagship store. Which of the following alternatives to integration does
this best illustrate?
22.
GreenCure Pharma Inc. wanted its research partner, an R&D company, to develop a
cancer vaccine. However, the project required huge capital investments, and its research
partner was not ready to solely face the risks involved. Thus, to gain its partner's
confidence and to prove its involvement, GreenCure Pharma invested $100 million in the
project. This investment made by GreenCure Pharma will result in a
23.
When Toyota wanted to secure a long-term supply of lithium, it had to create a bond of
trust with an Australian company, Orocobre Ltd. Orocobre wanted to establish the bond of
trust before making huge investments in specialized equipment required to extract the
high-quality lithium. What did Toyota do to instill this trust?
24.
Divina Pharma Inc. and MF Electronics Inc. have together invested and created a new
organization, FirstHealth Inc., to focus on developing diagnostic devices. Through this new
firm, both companies are attempting to combine their core competencies to innovate and
reduce their risks associated with transaction-specific investments. However, the new
organization operates independent of Divina Pharma and MF Electronics. Which of the
following alternatives to integration does this scenario best illustrate?
25.
Which of the following alternatives on the make-or-buy continuum allows for most
integration?
26.
Stellar Products Inc. is a U.S.-based consumer electronics company. It owns smaller firms
in Japan and Taiwan where most of its cell phone technology is developed and
manufactured before being released worldwide. Which of the following alternatives to
integration does this best illustrate?
27.
Which of the following is true of the parent-subsidiary relationship?
28.
_____ is best described as a firm's ownership of its production of needed inputs or of the
channels by which it distributes its outputs.
29.
A(n) _____ is best used to depict the transformation of raw materials into finished goods
and services along distinct vertical stages.
30.
Each stage of the vertical value chain typically represents a distinct _____ in which a
number of different firms are competing.
31.
_____ is best described as changes in an industry value chain that involve moving
ownership of activities closer to the end (customer) point of the value chain.
