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Exam 6: Vertical Integration

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Question 21

Multiple Choice

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To the extent that other firms may have competitive advantages in business activities that a firm is considering to enter through vertical integration, vertically integrating into these activities could put the firm at a

A) competitive advantage.
B) temporary dynamic disadvantage.
C) sustainable competitive advantage.
D) competitive disadvantage.

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Question 22

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Firm-specific investments are a type of ________ investments.

A) operational
B) contingent
C) transaction-specific
D) horizontal

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Question 23

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A firm engages in backward vertical integration when it incorporates more stages of the value chain within its boundaries and those stages bring it closer to gaining access to raw materials.

TerraLoc's decision to manufacture the battery in-house is most consistent with which explanation of vertical integration?

Numerous conflicts can arise among functional managers in a vertically integrated U-form organization.

Opportunism exists when a firm is unfairly exploited in an exchange.

While the functional or U-form structure is used to implement a cost-leadership or product-differentiation strategy, a matrix structure is most often used to implement a vertical integration strategy.

Evaluating a functional manager's performance relative to budgets can be an effective control when

The threat of opportunism is the least when a party to an exchange has made transaction-specific investments.

Research suggests that, in general, vertically integrating is more flexible than not vertically integrating.

Some observers predict that by ________ an additional 3.3 million jobs in the United States will be outsourced, many to operations overseas.

Strategizing is one of the most important control mechanisms available to CEOs in vertically integrated U-form organizations.

Which organizational structure is used to implement a vertical integration strategy?

Discuss the firm capabilities-based explanation of how vertical integration can create value. In your discussion identify the two broad implications of this approach and when, under this approach, firms should engage in vertical integration.

A transaction-specific investment is any investment in an exchange that has significantly more value in the current exchange than it does in alternative exchanges.

Which of the explanations of vertical integration is the oldest and has received the greatest empirical support?

If one of a firm's exchange partners behaves opportunistically, this reduces the economic value of the firm.

A firm's vertical integration strategy can only be rare when it is the only firm that is able to vertically integrate efficiently.

Flexibility is only valuable when the decision-making setting a firm is facing is uncertain.

A firm is likely to be among the first in its industry to vertically disintegrate an exchange when