Question 1

Long-term contracts:

Accepted Answer

A)   are preferable to short-term contracts when there is a minimal need for cooperation.
B)   are preferable to vertical integration when it is not feasible to exchange hostages.
C)   generally result in lower prices than competitive bidding.
D)   achieve the same outcomes as vertical integration, but they incur higher bureaucratic costs.
E)   are a low-cost alternative to vertical integration when it is possible to build cooperative relationships with suppliers.

Question 2

Which of the following is NOT a benefit of vertical integration?

Accepted Answer

A)   Facilitated investments in specialized assets
B)   Enhanced product quality
C)   Improved scheduling
D)   Lowered cost structure
E)   Strengthened differentiation advantage

Question 3

Sharing the expenses of investment in production assets or inventory, or making long-term supply or purchase guarantees are examples of vertical integration.

Accepted Answer

A) True 
 B)False

Question 4

Strategic alliances are:

Accepted Answer

A)   short-term agreements between two companies to jointly develop new products.
B)   short-term agreements between two companies to jointly market new products that benefit all companies involved in creating the product.
C)   short-term partnerships between two companies.
D)   long-term commitments between two companies to share research and development activities.
E)   long-term agreements between two or more companies to jointly develop new products or processes that benefit all companies that are a part of the agreement.

Question 5

Vertical integration can raise costs if, over time, a company's leaders continue to purchase inputs from company-owned suppliers even when independent suppliers can supply the same inputs at lower cost.

Accepted Answer

A) True 
 B)False

Question 6

All of the following are benefits of horizontal integration EXCEPT:

Accepted Answer

A)   reduced risk of coming into conflict with the FTC.
B)   increased product differentiation.
C)   reduced industry rivalry.
D)   increased bargaining power over suppliers.
E)   reduced cost structure.

Question 7

When technology in an industry is changing rapidly, a company pursuing a strategy of vertical integration may find itself:

Accepted Answer

A)   locked into an old, inefficient technology.
B)   able to sell its products at continually lower prices.
C)   increasing returns on its assets.
D)   establishing a monopoly in the industry.
E)   lowering its cost structure.

Question 8

A company must choose an appropriate corporate-level strategy after selecting the pricing option (lowest, average, or premium price) that will allow it to maximize profitability.

Accepted Answer

A) True 
 B)False

Question 9

How can strategic outsourcing strengthen a company's business model and increase its profitability?

Accepted Answer

Strategic outsourcing is the decision to...

Question 10

Which of the following benefits of vertical integration provides advantages to those businesses that want to use just-in-time (JIT)  inventory systems correctly?

Accepted Answer

A)   Improved scheduling
B)   Enhancing product quality
C)   Facilitating investments in specialized assets
D)   Demand unpredictability
E)   Increasing cost structure

Question 11

An example of increased product differentiation, acquiring or merging with a competitor helps to eliminate excess capacity in an industry.

Accepted Answer

A) True 
 B)False

Question 12

An advantage of horizontal integration is that it can lower a company's cost structure by creating increasing economies of scale.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is NOT a difference between in-house and independent suppliers?

Accepted Answer

A)   In-house suppliers have much less incentive to look for new ways to reduce operating costs or increase component quality.
B)   Independent suppliers can pass on cost increases in the form of higher transfer prices.
C)   Independent suppliers constantly need to increase their efficiency to protect their competitive advantage.
D)   In-house suppliers do not face competition and the resulting rising cost structure that reduces a company's profitability.
E)   When company-owned suppliers develop a higher cost structure than those of independent suppliers, vertical integration can be a major disadvantage.

Question 14

Which of the following describes a benefit of a long-term cooperative relationship over a short-term alliance?

Accepted Answer

A)   It is a substitute for vertical integration because it creates a relatively stable, long-term partnership that allows both companies to obtain the same kinds of benefits that result from vertical integration.
B)   It can help avoid the problems such as bureaucratic costs that arise from managerial inefficiencies that result when a company owns its own suppliers.
C)   Resulting cost savings are shared by suppliers who make substantial investments in specialized assets to better serve the needs of a particular business, and another company.
D)   The businesses jointly find ways to lower costs or increase product quality so both players gain from the relationship.
E)   All of these are benefits of a long-term cooperative relationship. They both gain from their relationship.

Question 15

Which of the following risks of outsourcing can be reduced by ensuring that there is appropriate communication between the outsourcing specialist and the company?

Accepted Answer

A)   Holdup
B)   Increased competition
C)   Loss of information and forfeited learning opportunities
D)   Enhanced differentiation
E)   Lower cost structure

Question 16

Adam's boss tells him that their company is pursuing the strategy of horizontal integration. Which of the following is true of this scenario?

Accepted Answer

A)   The company will acquire one of its suppliers.
B)   The company will buy or merge with one of its rivals.
C)   The company will begin to distribute its own products.
D)   The company will change the organizational structure to make it increasingly flat.
E)   The company will merge with another company that belongs to a different industry.

Question 17

The difference between full integration and taper integration is that taper integration includes outside suppliers and independent distributors during the in-house manufacturing function.

Accepted Answer

A) True 
 B)False

Question 18

Product bundling and cross-selling are ways to establish which of the following?

Accepted Answer

A)   Lowered cost structure
B)   Increased product differentiation
C)   Leveraged broad competitive advantage
D)   Increased bargaining power
E)   Reduced industry rivalry

Question 19

A merger occurs when one company uses capital resources such as stock, debt, or cash to purchase another company.

Accepted Answer

A) True 
 B)False

Question 20

Product bundling involves offering customers the opportunity to purchase a range of products at a single, combined price.

Accepted Answer

A) True 
 B)False

Exam 9: Corporate-Level Strategy: Horizontal Integration, Vertical Integration, and Strategic Outsourcing

Which of the following is NOT a benefit of vertical integration?

Correct AnswerverifiedShow Answer

Long-term contracts:

Correct AnswerverifiedShow Answer

Sharing the expenses of investment in production assets or inventory, or making long-term supply or purchase guarantees are examples of vertical integration.

Correct AnswerverifiedShow Answer

An advantage of horizontal integration is that it can lower a company's cost structure by creating increasing economies of scale.

Correct AnswerverifiedShow Answer

Product bundling and cross-selling are ways to establish which of the following?

Correct AnswerverifiedShow Answer

The difference between full integration and taper integration is that taper integration includes outside suppliers and independent distributors during the in-house manufacturing function.

Correct AnswerverifiedShow Answer

Which of the following describes a benefit of a long-term cooperative relationship over a short-term alliance?

Correct AnswerverifiedShow Answer

How can strategic outsourcing strengthen a company's business model and increase its profitability?

Correct AnswerverifiedStrategic outsourcing is the decision to...View AnswerShow Answer

All of the following are benefits of horizontal integration EXCEPT:

Correct AnswerverifiedShow Answer

A company must choose an appropriate corporate-level strategy after selecting the pricing option (lowest, average, or premium price) that will allow it to maximize profitability.

Correct AnswerverifiedShow Answer

Which of the following is NOT a difference between in-house and independent suppliers?

Correct AnswerverifiedShow Answer

A merger occurs when one company uses capital resources such as stock, debt, or cash to purchase another company.

Correct AnswerverifiedShow Answer

Which of the following risks of outsourcing can be reduced by ensuring that there is appropriate communication between the outsourcing specialist and the company?

Correct AnswerverifiedShow Answer

Strategic alliances are:

Correct AnswerverifiedShow Answer

Product bundling involves offering customers the opportunity to purchase a range of products at a single, combined price.

Correct AnswerverifiedShow Answer

When technology in an industry is changing rapidly, a company pursuing a strategy of vertical integration may find itself:

Correct AnswerverifiedShow Answer

Adam's boss tells him that their company is pursuing the strategy of horizontal integration. Which of the following is true of this scenario?

Correct AnswerverifiedShow Answer

Which of the following benefits of vertical integration provides advantages to those businesses that want to use just-in-time (JIT) inventory systems correctly?

Correct AnswerverifiedShow Answer

An example of increased product differentiation, acquiring or merging with a competitor helps to eliminate excess capacity in an industry.

Correct AnswerverifiedShow Answer

Vertical integration can raise costs if, over time, a company's leaders continue to purchase inputs from company-owned suppliers even when independent suppliers can supply the same inputs at lower cost.

Correct AnswerverifiedShow Answer

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Strategic outsourcing is the decision to...
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