MAN4720 Ch 8 Quiz and questions

The executives of Anaplan Inc., a large conglomerate, are making decisions on the stages of the industry value chain the firm must participate in, the range of products and services it should offer, and the global markets it should compete in. What are the executives primarily determining? - the firm's economies of scale - the boundaries of the firm - the firm's chain of command - the absorptive capacity of the firm

The boundaries of the firm

Which of the following is an example of internal transaction costs? - the costs pertaining to setting up a shop floor - the costs associated with searching for suitable manufacturer contracts - the costs associated with negotiating prices with a business consultancy - the costs linked to outsourcing payroll maintenance

The costs pertaining to setting up a shop floor

What is a major disadvantage of organizing economic activity within firms? - the principal-agent problem - transaction-specific investments - search costs - enforcement of contracts

The principal-agent problem

Which of the following is not a dimension along which corporate strategy is assessed? - the range of products and services the business offers - the size of the company in comparison to its main competitors - the stages of the industry value chain in which the business participates - where (geographically) to compete

The size of the company in comparison to its main competitors

Corporate-level strategy answers ________ a firm should compete. - where - when - how - who

Where

Select all that apply What are the four quadrants of the core competence-market matrix? (Check all that apply.) - existing competencies with existing markets - new competencies with existing markets - existing competencies with simultaneous markets - existing competencies with new markets - new competencies with related markets - new competencies with new markets

- Existing competencies with new markets - Existing competencies with existing markets - New competencies with new markets - New competencies with existing markets

Select all that apply Stages four and five of the industry value chain involve ______. (Check all that apply.) - manufacturing - final assembly - after-sales services and support - marketing - sales

- after-sales services and support - marketing - sales

Long-term contracts typically last ______. - 6 to 12 months - 1 to 2 months - indefinitely - 1 year or more

1 year or more

Which of the following best illustrates backward vertical integration? - an apparel company launching its line of premium wrist watches - a supplier of plastic bottles launching his or her own brand of sparkling water - a shoe brand outsourcing its production unit to manufacturers in less developed nations - a chocolate manufacturing company setting up its own cocoa plantations

A chocolate manufacturing company setting up its own cocoa plantations

Firms that pursue an unrelated diversification strategy and are unable to create additional value tend to experience which of the following? - a diversification premium - the principal-agent problem - a diversification discount - vertical market failure

A diversification discount

True or false: The industry value chain is also called the horizontal value chain.

False

If a company moves ownership of activities closer to the end customer, such as providing after-sales support, it is engaging in ______ vertical integration. - scaled - forward - backward - full

Forward

Zscaler started as an original equipment manufacturing firm (OEM) for brand-name mobile device companies. Later, it started offering a lineup of innovative and high-performance smartphones by acquiring BuildIt, a San Francisco-based design firm. This strategic move of Zscaler is known as - crowdsourcing - corporate divestiture - forward vertical integration - radical innovation

Forward vertical integration

Amazon's continued focus on ______ is a key to its ongoing success. - innovation - specific target markets - shareholder profits - employee perks

Innovation

What is the shape of the relationship between the level of diversification and performance? - exponential curve - straight line representing a positive, linear relationship - inverted U - U-shaped

Inverted U

In general, related diversification leads to high levels of performance because ______. - it allows the firm to focus on creating only one product or service - it is unable to overcome coordination and influence costs - it accesses numerous areas of value creation, such as economies of scale and scope - it focuses on creating as many products or services as possible

It accesses numerous areas of value creation, such as economies of scale and scope

In the taper integration system, a firm has ______ reliance on outside markets. - some - full - zero

Some

Select all that apply Corporate strategy needs to be dynamic over time in order to ______. (Check all that apply.) - diversify to capture growth opportunities - respond to the ever-changing external environment - keep and maintain a competitive advantage - avoid paying for coordination and influence costs

- diversify to capture growth opportunities - respond to the ever-changing external environment - keep and maintain a competitive advantage

Firms often consolidate industries through horizontal mergers and acquisitions to - solve principal-agent problems - lower their stock prices - increase their market power - motivate managers

Increase their market power

True or false: A major reason why a firm may choose a related diversification strategy is to take advantage of both economies of scale and of scope.

True

True or false: According to the make-or-buy continuum, strategic alliances are more integrated than short-term contracts.

True

True or false: It can be riskier to own parts of the supply chain than to rely on external supply chains.

True

The lemons problem suggests that information asymmetries can cause ______. - an equal distribution of inferior and superior goods - superior goods to be replaced by inferior ones - inferior goods to be replaced by superior ones - all goods to be average

Superior goods to be replaced by inferior ones

Transaction cost economics help managers do which of the following? - make sure that the firm can fulfill its taxpayer responsibilities - choose which activities to carry out within the firm - avoid paying transaction costs - understand which new products to commercialize

Choose which activities to carry out within the firm

"Which national markets should the firm compete in?" is an example of a ______-level strategic question. - national - local - regional - corporate

Corporate

TWN, a large multinational corporation, chose to spin off one of its SBUs that was unrelated to TWN's core business in order to avoid the ______. When they announced the spin-off, the stock price of TWN went up by 5%. - diversification discount - influence costs - economies of scale - diversification premium

Diversification discount

In the ______ quadrant of the core competence--market matrix, the focus is on leveraging current core competencies to improve current market position. - existing competence - new market - new competence - new market - new competence - existing market - existing competence - existing market

Existing competence - existing market

In the ______ quadrant of the core competence--market matrix, a firm combines existing core competencies with existing markets. - new core competence--existing market - existing core competence--existing market - existing core competence--new market - new core competence--new market

Existing core competence--existing market

Lillian, a real estate agent, is selling a moderately priced house in a subdivision. She knows from her uncle that the factory being built half a mile from the subdivision will be manufacturing dog food, using a process that creates a very strong odor that permeates the surrounding neighborhood. A buyer, who is unaware of the type of factory under construction, makes an offer on one of the houses Lillian is selling, and within a short time, the deal goes through. What does this scenario best illustrate? - network effects - experience-curve effects - principal-agent problems - information asymmetries

Information asymmetries

A large conglomerate is deciding on the range of new products and services it can offer to its customers to further expand its operations. This decision determines the firm's - level of diversification - vertical integration - geographic scope - horizontal integration

Level of diversification

Which of the following is an option for formulating strategy via core competencies? - build new core competencies to entice shareholders to invest in the company - pursue a strategic alliance to become less vertically integrated - leverage existing core competencies to improve current market position - combine core competencies with rivals in new markets

Leverage existing core competencies to improve current market position

Wheels on the Go! is a company that manufactures tires for semitrucks. The company is entirely owned by North American Haulers, a large company in the semitruck industry. The two companies have formed a(n) ______. - equity alliance - parent-subsidiary relationship - joint venture - strategic alliance

Parent-subsidiary relationship

Disney's ability to leverage its characters across its network of theme parks, media networks and movies, and consumer products is an example of a corporate - expansion into new geographies - integration advantage - synergy advantage - vertical advantage - parenting advantage

Parenting advantage

The first stage of the industry value chain is typically which of the following? - sales - intermediate goods - raw materials - components

Raw materials

Why did Coca-Cola enter into a strategic alliance with Monster? - so that it could gain private information to determine whether an acquisition might be beneficial - so that it could own every stage of its industry value chain - so that it could have full control of Monster regardless of the risk - so that it could use Monster's trademark and business processes

So that it could gain private information to determine whether an acquisition might be beneficial

Which of the following have significantly more value in their intended use than in their next-best use? - specialized assets - joint ventures - diversified strategies - backward investments

Specialized assets

A(n) ______ is a voluntary arrangement between firms that involves sharing of resources and capabilities with the intent of developing processes, products, or services. - industry-value chain - short-term contract - strategic alliance - parent-subsidiary relationship

Strategic alliance

Long-term contracts are classified as ______. - strategic alliances - acquisitions - activities performed in-house - parent-subsidiary relationships

Strategic alliances

What is the purpose of the core competence--market matrix? - to help firms moderate levels of vertical and horizontal integration - to assess how to respond to PESTEL forces - to alert executives of potential market instability - to provide guidance regarding how to diversify in order to grow the company

To provide guidance regarding how to diversify in order to grow the company

Which of the following best illustrates human-asset specificity? - investing in drilling equipment to drill through any commercial metal - training employees on how to operate a customized furnace - using standard casting machines in industrial manufacturing - instructing employees on how to operate a standard MRI scanner

Training employees on how to operate a customized furnace

______ is a theoretical framework that helps explain and predict the boundaries of the firm. - planned disadvantaged theory - corporate-level strategy - economics of scope - transaction cost economics

Transaction cost economics

When examining the ________ framework, strategic managers are trying to decide on what activities to perform inside the firm and/or outside the firm (external market). - transaction costs economics - economic investment forecasting - elasticity - corporate strategy

Transaction costs economics

What is an advantage of a firm in organizing economic activity? - low-powered incentives - the principal-agent problem - transaction-specific investments - administrative costs

Transaction-specific investments

Corporate Strategy helps managers understand which strategy question? -where should the firm expand? - how should the firm expand? - how can the firm buy out a competitor? - where should the firm compete? - how should the firm compete?

Where should the firm compete

Disney's expansion from short films to animated films to live action films to television is an example of - expansion into new markets by leveraging a core capability - expansion into new geographies by leveraging a core capability - expansion into vertical markets by leveraging a core asset - expansion into vertical markets to address critical supplier power - expansion into new geographies by leveraging assets

Expansion into new markets by leveraging a core capability

An inverted U-shaped relationship between the type of diversification and overall firm performance indicates that - high and low levels of diversification are generally associated with lower overall performance - moderate levels of diversification fail to achieve additional value creation - firms that compete in single markets benefit the most from economies of scope - levels of vertical integration and overall firm performance share an inverse relationship

High and low levels of diversification are generally associated with lower overall performance

Which type of alternative on the make-or-buy continuum involves competitive bidding by external companies hoping to acquire a temporary arrangement with a firm? - franchising - joint ventures - parent-subsidiary relationships - short-term contracts

Short-term contracts

In a fully vertically integrated organization, ______. - most, but not all, stages of the industry value chain are conducted within the firm - after-sales service and support is conducted within the firm, but other industry value chain activities might be outsourced - all stages of the industry value chain are conducted within the firm - only the raw materials and components stages of the industry value chain are conducted within the firm

All stages of the industry value chain are conducted within the firm

Highly diversified firms experience a diversification discount in the stock market because they - cannot leverage financial economies - are unable to create additional value - cannot influence costs - are unable to overcome institutional weaknesses in emerging economies.

Are unable to create additional value

Which of the following is the best option to take if you are the buyer and facing information asymmetry? - you should put your faith in the seller - you should pay the lowest price possible, not matter what the quality of the product might be - you should try to gather as much information as possible - you should assume that the product is a lemon

You should try to gather as much information as possible

Kava Botanicals, a boutique retailer that sells high-end makeup and accessories, is owned by two makeup manufacturers. Kava Botanicals is an example of which type of strategic alliance? - a long-term contract - a joint venture - an equity alliance - a short-term contract

A joint venture

Select all that apply Taper integration allows firms to ______. (Check all that apply.) - gain knowledge from external sources - be fully vertically integrated without relying on outside suppliers or outside distributors - be more flexible when responding to market changes such as fluctuations in demand - avoid market competition

- gain knowledge from external sources - be more flexible when responding to market changes such as fluctuations in demand

Select all that apply Advantages of organizing economic activity at the market level include which of the following? (Check all that apply.) - increased flexibility - administrative costs - low-powered incentives - high-powered incentives

- increased flexibility - high-powered incentives

Which of the following is the best option if a company wants to show strong commitment to a partner firm without acquiring that firm? - licensing - short-term contract - equity alliance - franchising

Equity alliance

The ______ depicts the transformation of raw materials into finished goods and services along distinct vertical stages, each of which represents a distinct industry in which a number of different firms are competing. - integrated materials model - joint integral framework - industry value chain - competing industry assessment

Industry value chain

Which type of diversification is most likely to lead to superior performance? - unrelated diversification - related diversification - single business - dominant business

Related diversification

Google's choice to hire programmers in-house suggests that they decided that the ______ costs associated with this strategy are ______ than the costs associated with contracting in the open market. - transaction; lower - administrative; higher - transaction; higher - opportunism; lower

Transaction; lower

When a firm is more efficient in organizing economic activity than markets are, the firm should ______. - horizontally integrate - pursue a cost-leadership strategy - merge with another firm - vertically integrate

Vertically integrate

The most integrated alternative to vertical integration is ______. - the parent-subsidiary relationship - the equity alliance - the joint venture - long-term contracting

The parent-subsidiary relationship

Select all that apply What are the three dimensions along which executives formulate corporate strategy? - The size of the top management team - The geographic scope - The degree of vertical integration - The type of diversification

- The geographic scope - The degree of vertical integration - The type of diversification

Select all that apply The Boston Consulting Group growth-share matrix locates a firm's individual SBUs in which of the following dimensions? (Check all that apply.) - speed of market growth - relative market share - unrelated diversification economies - extent of vertical integration

- speed of market growth - relative market share

Select all that apply Why might a firm want to enter into an equity alliance instead of a short- or long-term contract? (Check all that apply.) - to make a credible commitment - to allow the partner to use the firm's trademark and business processes - to get insider information about the partner's business - to facilitate transaction-specific investments

- to make a credible commitment - to get insider information about the partner's business - to facilitate transaction-specific investments

Select all that apply What are advantages of organizing economic activity inside of a firm? (Check all that apply.) - transaction-specific investments - command-and-control decisions - high-powered incentives - the creation of a community of knowledge

- transaction-specific investments - command-and-control decisions - the creation of a community of knowledge

Select all that apply Which types of diversification tend to have the lowest performances? (Check all that apply.) - unrelated diversification - single business - related diversification - dominant business

- unrelated diversification - single business

Select all that apply Amazon's explosive success is largely due to which of the following? (Check all that apply.) - vertical integration - single business focus - information asymmetry - diversification

- vertical integration - diversification

What is licensing? - a strategic alliance in which one firm takes partial ownership of another - a long-term contract in which a firm allows the use of its trademark and business processes - a long-term contract that enables firms to commercialize intellectual property - a short-term contract that provides more time to plan than individual market transactions allow

A long-term contract that enables firms to commercialize intellectual property

When Pluralsight Products planned to start its operations in Amerigo, an emerging nation, it realized that it would have to set up its own distribution channels. This would be a risky and expensive strategic move. The company had an option of hiring a small supply chain management company, Elastic Logistics, to reach its ultimate customers. However, this would require Elastic Logistics to make huge investments, which would be of no use to it if Pluralsight Products decided to exit the market. Thus, to gain Elastic Logistics' confidence, Gilded Products purchased 40 percent of the stock of Elastic Logistics. What does this scenario best illustrate? - equity alliance - franchising - licensing - venture capitalism

Equity Alliance

A benefit of ______ is that in-house suppliers and distributors are subjected to market competition, which allows the firm to assess performance in comparison to others. - taper integration - joint ventures - specialized assets - full vertical integration

Taper integration

Which of the following best illustrates a dominant-business firm? - Alpine Income Property Trust is a company whose multiple strategic business units contribute equally to the total corporate revenue - 89bio Inc. is a luxury brand that derives 90 percent of its revenues from its apparel line and 10 percent of its revenues from its premium furniture business unit - ECMOHO Ltd. is a company whose revenues solely come from selling automobiles - Fanged Network Group is a firm that derives 50 percent of its revenues from its steel unit and another 50 percent from its automobile businesses

89bio Inc. is a luxury brand that derives 90 percent of its revenues from its apparel line and 10 percent of its revenues from its premium furniture business unit

Which of the following is an example of the principal-agent problem even when the principal's goal is to create shareholder value? - a manager receiving generous stock options - a manager controlling and limiting business expenses - a manager flying first class on all business trips - a manager making decisions based on what is best for the company

A manager flying first class on all business trips

Which of the following examples would most likely limit a firm's growth? - A social entrepreneur wants to combine large profits with a socially responsible approach - A social entrepreneur makes conservation of the environment the primary goal of his firm - An entrepreneur sees retraining managers to eliminate principal-agent problems as a main goal of her firm - An entrepreneur views joining a conglomerate as an important opportunity to reduce risks

A social entrepreneur makes conservation of the environment the primary goal of his firm

Which of the following is an n automobile example of related-constrained diversification? - a consumer electronics company launching its own line of designer apparel and accessories - an automobile company that manufactures petrol cars expanding into the diesel car industry - a grocery store leveraging its extra shelf space by stocking kitchen appliances - a company dealing in home appliances hiring another company to carry out its marketing strategies

An automobile company that manufactures petrol cars expanding into the diesel car industry

When a manufacturer of computers starts to produce its own computer components, the manufacturer engages in ______ vertical integration. - linear - backward - full - forward

Backward

North Carolina National Bank (NCNB) used its unique core competency of identifying, appraising, and integrating acquisition targets to be rebranded as Bank of America, one of the largest banks in the United States. This is an example of a firm - leveraging existing core competencies to improve current market position - building new core competencies to protect new market position - redeploying and recombining existing core competencies to compete in markets of the future - building new core competencies to create and compete in markets of the future

Leveraging existing core competencies to improve current market position

A disadvantage associated with obtaining goods and services externally includes - high administrative costs due to increased bureaucracy - low-powered incentives for an individual to work as an entrepreneur for the firm - nontrivial search costs to be borne by the firm - creation of economies of scope for the firm

Nontrivial search costs to be borne by the firm

What is a related-linked diversification strategy? - one in which a firm's low- and mid-level workers convince executives to give them a chance to decide corporate strategy - one in which a firm derives more than 70% of its revenues from a single business and there are few, if any, linkages among its businesses - one in which executives pursue various businesses opportunities that share only a limited number of linkages - one in which executives pursue only businesses where they can apply the resources and core competencies already available in the primary business

One in which executives pursue various businesses opportunities that share only a limited number of linkages

LMP Automotive Holdings Inc., a large multinational conglomerate, has hired an external consultant to process and audit its payroll. This allows the company to focus on manufacturing and marketing activities rather than developing and maintaining its own human resource management systems. Which of the following alternatives to vertical integration has LMP Automotive Holdings Inc. adopted? - crowdsourcing - forward integration - backward integration - strategic outsourcing``

Strategic outsourcing

Strategic managers who are interested in diversifying their firm should always remember that - successful diversification should be aligned with and strengthen a firm's business strategy - forward vertical integration is more successful than backward vertical integration - a single-business diversification strategy generally works best - it's always a good idea to limit the size and scope of firms in order to achieve competitive advantage

Successful diversification should be aligned with and strengthen a firm's business strategy

______ is a way of orchestrating value activities in which a firm is backwardly or forwardly integrated and relies on outside-market firms for supplies or distribution. - strategic outsourcing - horizontal integration - vertical integration - taper integration

Taper integration

The degree of vertical integration corresponds to ______. - the number of parent-subsidiary relationships a firm is involved in - the firm's level of integration with the host country's infrastructure - the firm's level of integration among the alternative industry types - the number of industry value chain stages in which a firm directly participates

The number of industry value chain stages in which a firm directly participates

There are several decisions that strategic managers must make when developing corporate-level strategy. Which of the decisions below are not relevant when considering corporate-level strategy? - what range of products and services should be offered - where, globally, the company should compete - what stages of the industry value chain to participate in - which strategic position (differentiation or cost leadership) to engage in

Which strategic position (differentiation or cost leadership) to engage in

Which of the following is the best option to take if you are the buyer and facing information asymmetry? - You should pay the lowest price possible, no matter what the quality of the product might be - You should assume that the product is a lemon - You should put your faith in the seller - You should try to gather as much information as possible

You should try to gather as much information as possible

________ is best described as the changes in an industry value chain that involve moving ownership of activities upstream to the originating (inputs) point of the value chain. - disruptive innovation - corporate divestiture - reverse engineering - backward vertical integration

Backward vertical integration

The rationale behind related diversification is to - limit learning-curve and experience-curve effects - benefit from economies of scale and scope - obtain only 10% of the revenues from the primary business activities - avoid sharing resources and competencies across different business lines

Benefit from economies of scale and scope

Amazon expanded its single-product business by leveraging spare capacity into cloud computing and by offering its Kindle line of tablet computers and Echo line of digital assistants. This is an example of - unrelated diversification - related-linked diversification - taper inegration - backward vertical integration

Related-linked diversification

______ are perhaps the major drawback of transacting in markets. - transaction cost economies - search costs - administrative costs - strategic emergences

Search costs

______ are unique assets with high opportunity cost. - specialized assets - diversified strategies - horizontally integrated assets - equity alliances

Specialized assets

A disadvantage of a short-term contract as an alternative on the make-or-buy continuum is that ______. - the supplying firm has little reason to perform transaction-specific investments - the supplying firm has a longer planning period in comparison to individual market transactions - the supplying firm has a shorter planning period than it has for individual transactions - the buying firm can get a lower price for the work because of the competitive bidding process

The supplying firm has little reason to perform transaction-specific investments

______ refers to the firms' ownership of its production of needed inputs or of the channels by which it distributes its outputs. - subsidiary relationship - industry value chain - horizontal integration - vertical integration

Vertical integration

What happens when the markets along the industry value chain are too risky and alternatives too costly in time or money? - unrelated diversification failure - horizontal market failure - related diversification failure - vertical market failure

Vertical market failure

Olivia's, an olive oil company, grows and harvests olives, makes olive oil, and distributes its olive oil to its retail shop. Olivia's is an example of ______. - parent-subsidiary relationship - a vertically disintegrated company - a fully vertically integrated company - a horizontally disintegrated company

A fully vertically integrated company

What type of arrangement did Coca-Cola form with Monster in 2014? - a franchiser-franchisee relationship - a joint venture - an equity alliance - a licenser-licensee relationship

An equity alliance

The ______ is a corporate planning tool in which the corporation is viewed as a portfolio of business units. - Boston Consulting Group (BCG) growth-share matrix - VRIO framework - portfolio planning matrix - harvest-consolidation-growth matrix

Boston Consulting Group (BCG) growth-share matrix

Kanye loves Benicio's Burritos and wants to open a branch in his hometown. Benicio's Burritos grants Kanye the right to use its trademark and name, and Kanye agrees to follow Benicio's Burritos guidelines. This is an example of ______. - franchising - short-term contracts - licensing - equity alliance

Franchising

A(n) __ is a standalone organization created and jointly owned by two or more parent companies. - strategic alliance - joint venture - equity alliance - standalone subsidiary

Joint venture

What is a related-linked diversification strategy? - one in which executives pursue only businesses where they can apply the resources and core competencies already available in the primary business - one in which a firm's low- and mid-level workers convince executives to give them a chance to decide corporate strategy - one in which executives pursue various businesses opportunities that share only a limited number of linkages - one in which a firm derives more than 70% of its revenues from a single business and there are few, if any, linkages among its businesses

One in which executives pursue various businesses opportunities that share only a limited number of linkages

When a multi-business firm pools and shares resources and leverages competencies across different business lines, it is following a(n) ______. - fully vertically integrated strategy - related diversification strategy - single-business strategy - strategic outsourcing model

Related diversification strategy

Which diversification strategy involves executives pursuing various business opportunities that share only a small number of similarities? - unrelated - dominant business - related-constrained - related-linked

Related-linked