Business Strategy Final

What kind of economies come from reductions in cost due to adoption of technology that has high fixed costs, but lower variable costs?

long-run economies of scale

What concept describes the situation where the owner of an asset grants another part the right to use that asset, but the owner retains all controlling rights that are not explicitly stipulated in the contract?

residual rights of control

What do the vertical boundaries of a firm refer to?

the activities the firm itself performs versus purchases from independent firms

Which practice does not contribute to the strategic fit of southwest airlines?

use of multiple types of planes

What term describes when a firm has minimized the extent to which the exchange of good and services is the vertical chain has been designed to minimize something agency and transaction costs?

Agency efficency

Not a benefit of tapered integration?

Allows the firm to produce most efficiently in all circumstances

Which of the following is not a benefit that Toys R Us gained through its alliance with McDonald's Japan?

Changes to Japans large scale retail store law requiring MITL approval

Which of the following has a downstream relationship with a Toyota master corporation?

Dealerships

Why is firm specific learning better in general for an organization?

Ensures worker knowledge is tied to current employment

Suppose we have two firms 1 and 2 they enter into a transaction where 1 is upstream of 2 in a vertical chain. What term describes the organization of the transaction where 1 owns the assets of 2?

Forward integration

How does umbrella branding aid economies of scale and scope?

Increases effectiveness of advertising due to offering a broad product line under one name

Which type of strategic alliance involves two or more firms creating and together owning a new independent organization?

Joint venture

What asset specificity form describes why glass container production requires molds customer tailored to particular container shapes and glass making machines?

Physical asset specificity

Which of the following is not a result of the holdup problem?

Reduction in the transaction costs of arms length market exchanges

What is a reason that companies might want to "buy" instead of "make" talent from the market when looking to acquire employees with a particular skill set?

Scale economies can result in fixed education costs while in house education methods may be more expensive

Describes economies of scope?

The average cost remains constant as output increases

Which is true with regard to the difference in production costs between items produced in a vertically integrated firm and an item exchanged through an arms length market transaction as the level of asset specificity increases?

The cost difference declines with greater asset specificity

Which is not a product of specific fixed cost?

The cost of administrative expenses

Which of the following is a reason for a firm to Buy rather than make?

Upstream firms aggregate the demands of many buyers and provide economies of scale

Which is a conclusion that we make about vertical integration with regards to product market share and scope?

a firm with multiple product lines will benefit more from being vertically integrated in the production of components for those products in which it can achieve significant market scale

What are agency costs?

costs associated with outsourcing of firm functions