Question 1

Which of the following strategies facilitates the implementation of a just-in-time inventory system?

Accepted Answer

A)   Short-term contracts
B)   Vertical integration
C)   Unrelated diversification
D)   Diversification based on transferring competencies
E)   Diversification based on realizing economies of scope

Question 2

Companies can maintain market discipline over suppliers by

Accepted Answer

A)   outsourcing.
B)   demanding hostages.
C)   attaining a credible commitment.
D)   parallel sourcing.
E)   full integration.

Question 3

Compare the benefits and risks associated with horizontal and vertical integration.Under what circumstances would a firm prefer one over the other?

Accepted Answer

Horizontal integration has many of the same benefits and risks as vertical integration.For example,both risk the inability to blend two different organizational cultures,both can lead to lower costs,and so on.One area of difference is that horizontal integration is always with rivals,while vertical integration is with buyer or supplier firms.Therefore,the nature of the integration,implementation,and anticipated cost savings is different.Another difference is that vertically integrated firms face the risk of high operating costs relative to outside suppliers or buyers due to lack of competitive pressure.A third difference is that the bureaucratic costs of vertical integration are likely to be higher because of the need for close coordination between business units that are connected in the same supply chain,which is not a concern for a horizontally integrated firm.
Mergers are more common than acquisitions when the two firms are of approximately equal size,although there have been acquisitions between equals,and smaller firms have even acquired larger ones.An acquisition requires cash or some other form of payment to meet the purchase price,while a merger is a mere blending of assets and so may be preferable for cash-poor companies.Also,a merger is always friendly,while an acquisition may be either friendly or hostile.When one party is reluctant to enter into the deal,acquisition would be the preferred method.

Question 4

To build trust in a cooperative relationship,both firms can

Accepted Answer

A)   rely on competitive bidding.
B)   make mutual investments in specialized assets.
C)   write short-term contracts that must be renewed frequently.
D)   increase their vertical integration.
E)   use outsourcing of noncore activities.

Question 5

Vertical integration can be risky when demand is unpredictable because it is hard to manage the volume or flow of products along the value-added chain.

Accepted Answer

A) True 
 B)False

Question 6

Horizontal integration almost always increases rivalry in an industry.

Accepted Answer

A) True 
 B)False

Question 7

A strategic alliance is a substitute for horizontal integration.

Accepted Answer

A) True 
 B)False

Question 8

An advantage of horizontal integration is that by staying in one industry,a firm can focus its resources and capabilities on competing successfully in just one area.

Accepted Answer

A) True 
 B)False

Question 9

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)   all of these choices.
E)   none of these choices.

Question 10

When Hewlett Packard and Compaq merged,the combined firm was larger and therefore could negotiate lower prices from suppliers.This benefit of horizontal integration is called

Accepted Answer

A)   economies of scale.
B)   reduction of excess capacity.
C)   cross-selling.
D)   product bundling.
E)   market power. E

Question 11

The term bureaucratic costs refers to costs associated with the creation and maintenance of the administrative function in a company.

Accepted Answer

A) True 
 B)False

Question 12

Even though companies may invest in specialized assets to build competitive advantage,it is seldom necessary that suppliers do so.

Accepted Answer

A) True 
 B)False  False

Question 13

Companies invest in specialized assets because these assets allow them to

Accepted Answer

A)   lower their cost structure.
B)   charge excessive prices for their products.
C)   better differentiate their products.
D)   A and B.
E)   A and C.

Question 14

A company seeking to form a long-term strategic alliance needs to enter the agreement with total trust in its partner to live up to its end of the agreement.

Accepted Answer

A) True 
 B)False

Question 15

Vertical integration is based on a company entering industries that add ____ to its core products.

Accepted Answer

A)   costs
B)   little or nothing
C)   incremental elements
D)   shipping expenses
E)   value

Question 16

Tina's Technologies is expanding its operations backward into an industry that produces inputs for the company's products.Tina's Technologies is utilizing horizontal integration.

Accepted Answer

A) True 
 B)False

Question 17

In 1999,Glaxo Wellcome and SmithKline Beecham came together to create a single firm known as GlaxoSmithKline.This is an example of a(n)

Accepted Answer

A)   merger.
B)   acquisition.
C)   reverse takeover.
D)   parallel sourcing policy.
E)   credible commitment.

Question 18

John's surfboard shop has a long-term relationship with two surfboard makers.John is using

Accepted Answer

A)   parallel sourcing.
B)   cross-selling.
C)   product bundling.
D)   vertical integration.
E)   horizontal integration.

Question 19

Competitive bidding makes suppliers reluctant to make investments that tie them closely to their trading partners.

Accepted Answer

A) True 
 B)False

Question 20

Vertical integration can be disadvantageous when

Accepted Answer

A)   competitors are vertically integrated.
B)   demand is stable.
C)   industry technology is changing rapidly.
D)   technology is changing slowly.
E)   competitors are vertically integrated and industry technology changes rapidly.

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

Which of the following strategies facilitates the implementation of a just-in-time inventory system?

Correct Answer
verified

Companies can maintain market discipline over suppliers by

Correct Answer
verified

Compare the benefits and risks associated with horizontal and vertical integration.Under what circumstances would a firm prefer one over the other?

To build trust in a cooperative relationship,both firms can

Correct Answer
verified

Vertical integration can be risky when demand is unpredictable because it is hard to manage the volume or flow of products along the value-added chain.

Correct Answer
verified

Horizontal integration almost always increases rivalry in an industry.

Correct Answer
verified

A strategic alliance is a substitute for horizontal integration.

Correct Answer
verified

An advantage of horizontal integration is that by staying in one industry,a firm can focus its resources and capabilities on competing successfully in just one area.

Correct Answer
verified

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

Correct Answer
verified

When Hewlett Packard and Compaq merged,the combined firm was larger and therefore could negotiate lower prices from suppliers.This benefit of horizontal integration is called

Correct Answer
verified
E

The term bureaucratic costs refers to costs associated with the creation and maintenance of the administrative function in a company.

Correct Answer
verified

Even though companies may invest in specialized assets to build competitive advantage,it is seldom necessary that suppliers do so.

Correct Answer
verified
False

Companies invest in specialized assets because these assets allow them to

Correct Answer
verified

A company seeking to form a long-term strategic alliance needs to enter the agreement with total trust in its partner to live up to its end of the agreement.

Correct Answer
verified

Vertical integration is based on a company entering industries that add ____ to its core products.

Correct Answer
verified

Tina's Technologies is expanding its operations backward into an industry that produces inputs for the company's products.Tina's Technologies is utilizing horizontal integration.

Correct Answer
verified

In 1999,Glaxo Wellcome and SmithKline Beecham came together to create a single firm known as GlaxoSmithKline.This is an example of a(n)

Correct Answer
verified

John's surfboard shop has a long-term relationship with two surfboard makers.John is using

Correct Answer
verified

Competitive bidding makes suppliers reluctant to make investments that tie them closely to their trading partners.

Correct Answer
verified

Vertical integration can be disadvantageous when

Correct Answer
verified

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

Which of the following strategies facilitates the implementation of a just-in-time inventory system?

Correct AnswerverifiedShow Answer

Companies can maintain market discipline over suppliers by

Correct AnswerverifiedShow Answer

Compare the benefits and risks associated with horizontal and vertical integration.Under what circumstances would a firm prefer one over the other?

To build trust in a cooperative relationship,both firms can

Correct AnswerverifiedShow Answer

Vertical integration can be risky when demand is unpredictable because it is hard to manage the volume or flow of products along the value-added chain.

Correct AnswerverifiedShow Answer

Horizontal integration almost always increases rivalry in an industry.

Correct AnswerverifiedShow Answer

A strategic alliance is a substitute for horizontal integration.

Correct AnswerverifiedShow Answer

An advantage of horizontal integration is that by staying in one industry,a firm can focus its resources and capabilities on competing successfully in just one area.

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

When Hewlett Packard and Compaq merged,the combined firm was larger and therefore could negotiate lower prices from suppliers.This benefit of horizontal integration is called

Correct AnswerverifiedE

The term bureaucratic costs refers to costs associated with the creation and maintenance of the administrative function in a company.

Correct AnswerverifiedShow Answer

Even though companies may invest in specialized assets to build competitive advantage,it is seldom necessary that suppliers do so.

Correct AnswerverifiedFalse

Companies invest in specialized assets because these assets allow them to

Correct AnswerverifiedShow Answer

A company seeking to form a long-term strategic alliance needs to enter the agreement with total trust in its partner to live up to its end of the agreement.

Correct AnswerverifiedShow Answer

Vertical integration is based on a company entering industries that add ____ to its core products.

Correct AnswerverifiedShow Answer

Tina's Technologies is expanding its operations backward into an industry that produces inputs for the company's products.Tina's Technologies is utilizing horizontal integration.

Correct AnswerverifiedShow Answer

In 1999,Glaxo Wellcome and SmithKline Beecham came together to create a single firm known as GlaxoSmithKline.This is an example of a(n)

Correct AnswerverifiedShow Answer

John's surfboard shop has a long-term relationship with two surfboard makers.John is using

Correct AnswerverifiedShow Answer

Competitive bidding makes suppliers reluctant to make investments that tie them closely to their trading partners.

Correct AnswerverifiedShow Answer

Vertical integration can be disadvantageous when

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
E

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified