Bus 493 exam review 6

False

In the BCG matrix, "Cash Cow" is characterized by high market share and high industry growth. True or False?

False

Low powered incentive is an example of costs of "buy" (i.e. market sourcing). True or False?

c. A long-term agreement with competitors to fix the market price for a commodity product

Which of these choices is NOT an example of a vertical relationship? a. A franchise agreement b. An exclusive single-supplier agreement c. A long-term agreement with competitors to fix the market price for a commodity product d. A joint development group between a supplier and a customer

Transaction Cost Economics

_________________ provides theoretical background regarding why firms do outsourcing (buy) or in-house production (make). What is the name of theory?

True

"Brand extension" is also a way to achieve an "economy of scope", by using a good reputation built around one product to help sell a different product or service. True or False?

True

Acquisitions can become a substitute for innovation in some firms and trigger future rounds of acquisitions. True or False?

True

An "economy of scope" is where a firm can spread the fixed cost of a common resource or a shared service across multiple products or activities. True or False?

False

Backward vertical integration gives a company far more power over the supplier. This is a type of high-powered incentive. True or False?

True

Corporate strategy is concerned with 'where' a firm competes (in which industries it competes), while business strategy is concerned with 'how' a firm competes in a specific industry. True or False?

False

Firms can increase their speed to market for new products by pursuing an internal product development strategy rather than an acquisition strategy. True or False?

d. de-integration.

Firms seek to create value from economies of scope through all of the following EXCEPT a. activity sharing. b. skill transfers. c. transfers of corporate core competencies. d. de-integration.

True

High transaction-specific investment between two industrial process stages is more likely to lead to vertical integration of these processes. True or False?

False

If the transaction costs associated with buying in a product or service from the market costs more than the firm providing this internally, then the firm will outsource. True or False?

True

In diversification decision, the better-off-test means "either the new unit must gain competitive advantage from its link with the corporation, or vice versa". True or False?

(a) Tends to be particularly unsuccessful.

Mergers and acquisitions are frequent. Diversifying into another industry this way: (a) Tends to be particularly unsuccessful. (b) Tends to be better than strategic alliance. (c) Is advisable, because it's a relatively low-cost entry method. (d) Is preferred by shareholders, hence the frequency of this method.

True

Outsourcing is a form of de-integration or disaggregation. True or False?

True

Procter & Gamble (P&G) has a paper towel and baby diaper business that both use paper products. This is an example of value created through the sharing of activities. True or False?

True

The fewer number of supplier firms, the greater are the market transaction costs. Thus, vertical integration is preferred over outsourcing. True or False?

True

The greater the information asymmetries between focal firm and supplier(s), the more likely is opportunistic behavior and the greater the advantages of vertical integration. True or False?

True

The greater the unpredictability of market demand, the greater flexibility advantages of outsourcing. True or False?

d. horizontal acquisition.

The purchasing of firms in the same industry is called: a. unrelated diversification. b. vertical integration. c. networking the organization. d. horizontal acquisition.

True

The reasons why a firm would overpay for a company that it acquires include inadequate due diligence. True or False?

True

The usual justification for a diversification strategy is a combination of growth, spreading risk and creating extra value. True or False?

True

Vertical integration of the supplier firm is more likely when there is a high level of transaction- specific investment. True or False?

False

Where there is volatile, uncertain demand for a resource, it is more likely that this resource will be internally produced (make-decision). True or False?