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Exam 8: Corporate Strategy: Vertical Integration and Diversification

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Question 1

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A strategy of _____ will be most beneficial for a firm to enhance its overall corporate performance.

A) unrelated level of diversification
B) single-business level of diversification
C) dominant-business level of diversification
D) related-linked diversification

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D

Question 2

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How do firms benefit from vertical integration?

A) Vertical integration allows firms to reduce organizational complexity and administrative costs.
B) Firms that vertically integrate will have increased strategic flexibility when faced with technological changes.
C) Firms that vertically integrate do not have to make transaction-specific investments.
D) Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.

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Question 3

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Which of the following best illustrates site specificity?

_____,which are incurred when pursuing a related-diversification strategy,are a function of the number,size,and types of businesses that are linked to one another.

Fantastica Industries,a U.S.-based large conglomerate,competes in the hospitality,education,telecommunications,entertainment,airlines,and chemical industries.It currently operates in about 30 nations,and is planning to expand its portfolio by investing in rapidly developing countries.Which of the following strategies is Fantastica Industries pursuing?

Which of the following motivations for business growth involves principal-agent problems?

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

How does a conglomerate benefit from following an unrelated diversification strategy?

Win Goods Inc.is a large multinational conglomerate.As a single business unit,the company's stock price is estimated to be $200.However,by adding the actual market stock prices of each of its individual business units,the stock price of the company as one unit would be $300.What is Win Goods experiencing in this scenario?

Companies that pursue related diversification are able to create a diversification premium because they

Which of the following companies will be considered as a conglomerate?

ESB Group is the parent company of many related businesses under its banner.Each share of the parent company is quoted at $220.However,if this had to be assessed by adding the stock prices of each of its strategic business units,the value would only be $200 per share.In this scenario,what has ESB Group created?

The core competency of MotorCraft Inc.is its fuel-efficient engine found in its cars.These engines are developed and built in-house.The company realizes that there is a new market opportunity to diversify.Thus,it produces the car engines on a large scale and sells them to other automobile companies.In this scenario,MotorCraft is

_____ is best described as a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property.

Neon Electronics Inc.sourced touch screens required for its tablet computers,cell phones,and televisions from a manufacturer in China.But the demand for such components was high globally,and the supplier could not meet the quality standards of Neon Electronics.Thus,Neon Electronics decided to set up its own unit to develop and manufacture the required touch screens.What does this scenario best illustrate?

A firm sources intermediate goods and components from in-house suppliers as well as outside suppliers.In a similar fashion,another firm sells its products through company-owned retail outlets and through independent retailers.Both of these examples demonstrate

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources,it can be concluded that the firm is using

Vehmo Inc.is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars.The company realizes that more of its potential customers are switching to electric cars.The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car.In this scenario,Vehmo is primarily

Companies that pursue related diversification are more likely to improve their performance than companies that pursue unrelated diversification because they create a

_____ is when a firm moves activities and jobs outside its home country.