Exam 2 Review (6)
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.
A
According to transaction cost economics, 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?
False
In the BCG matrix, "Cash Cow" is characterized by high market share and high industry growth. True or False?
False
The greater the unpredictability of market demand, the greater flexibility advantages of outsourcing. True or False?
True
Crimson Corp., a painting unit, collaborates with a car manufacturing company. They sign a contract that specifies the tasks of each party in alliance. Which of the following is being exemplified in this scenario? (a) A nonequity alliance (b) An equity alliance (c) A joint venture (d) A vertical alliance
a
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
c
Which one of the following statement is NOT true? (a) A dominant strategy is a best response to every strategy of the opponent other player. (b) Dominated strategy provides a player a smaller payoff than other strategies. (c) If a player does not have a dominant strategy, then he or she cannot have dominated strategies. (d) In Nash equilibrium, no player has an incentive to change his/her chosen strategy.
c
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.
d
The purchasing of firms in the same industry is called: a. unrelated diversification. b. vertical integration. c. networking the organization. d. horizontal acquisition.
d
Backward vertical integration gives a company far more power over the supplier. This is a type of high-powered incentive. 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?
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?
False
( ) provides theoretical background regarding why firms do outsourcing (buy) or in-house production (make). Write the name of theory.
Transaction Cost Economics
"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?
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?
True
High transaction-specific investment between two industrial process stages is more likely to lead to vertical integration of these processes. True or False?
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 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?
True
In institutional theory perspective, ( ) refers to the tendency of an organization to imitate another organization's behaviors, which provides organizational legitimacy . (a) isomorphism (b) conformity (c) inertia (d) non-market strategy
a
Which one of the following statement is NOT true? (a) Low powered incentive is an example of costs of "buy" (i.e. market sourcing). (b) 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". (c) The fewer number of supplier firms, the greater are the market transaction costs. Thus, vertical integration is preferred over outsourcing. (d) 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.
a
