Strategic Management ch. 8 Corporate Strategy: Vertical Integration and Diversification

What are the four quadrants of the core competence-market matrix

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

What are the types of vertical integration along the industry value chain?

- forward - backward

The Boston Consulting Group growth-share matrix locates a firm's individual SBUs in which dimensions?

- relative market share - speed of market growth

Which type of cost in a related-diversification strategy is a function of the number, size, and type of businesses that are linked?

Coordination

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?

Joint venture

Long-term contracts include which of the following forms?

Franchising Licensing

What is the shape of the relationship between the level of diversification and performance?

Inverted U

A(n) ________________ is a situation in which the stock price of highly diversified firms is valued as less than the sum of their individual business units.

diversification discount

In the Boston Consulting Group matrix, ____________ hold the small market share in a low-growth market.

dogs

In general, related diversification leads to high levels of performance because ____________.

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

A(n) ______________ is a voluntary arrangement between firms that involves sharing of resources and capabilities with the intent of developing processes, products, or services.

strategic alliance

The most integrated alternative to vertical integration is ______________.

the parent-subsidiary relationship

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

Unlike short-term contracts, long-term contracts encourage firms to make _____________ investments.

transaction specific

In order to assess whether ________ is working, managers can ask if the individual businesses are worth more under the firm's management or if they are worth more under individual management.

diversification

Which type of diversification is most likely to lead to superior performance?

related diversification

_______________ is a situation in which one party has more knowledge than another due to the possession of private knowledge.

Information asymmetry

Long-term contracts, equity alliances, and joint ventures are examples of which of the following?

Strategic alliances

What is the purpose of the core competence-market matrix?

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

_______________ are partnerships in which at least one partner takes partial ownership in the other partner.

Equity alliances

What the types of general diversification strategies?

- geographic - product market - product

T or F. Related diversification is more likely to generate incremental value than unrelated diversification.

True

What is a major disadvantage of organizing economic activity within firms?

Principal-agent problem

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?

Short-term contracts

What are the reasons firms need to grow?

1. Increase profits 2. Lower costs 3. Increase market power 4. Reduce risk 5. Motivate management