Chapter 8 LearnSmart

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

-the size of the company in comparison to its main competitors

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

True

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 venture -a short-term contract

a joint venture

In the Boston Consulting Group growth-share matrix, each of the four categories in the matrix represents __. -a kind of taper integration strategy -points on the make-or-buy continuum -a different investment strategy -individual economies of scope

-a different investment strategy

The luxury car division of Tata Group, with the purchase of Jaguar and Land Rover, is pursuing which of the following on the business level? -a focused cost leadership strategy -a broad differentiation strategy -a focused differentiation strategy -a broad cost leadership strategy

-a focused differentiation strategy

In the Boston Consulting Group matrix, __ hold the small market share in a low-growth market. -question marks -stars -dogs -cash cows

-dogs

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

-existing competence-existing market

Which of the following are advantages of organizing economic activity OUTSIDE of a firm? (Check all that apply.) -lower administrative costs -command-and-control decision making -high-powered incentives -the creation of a community of knowledge

-lower administrative costs -high-powered incentives

A firm follows a(n) __ diversification strategy when it derives less than 70% of its revenues from a single business activity and obtains revenues from other lines of business that are linked to the primary business activity. -unrelated -single -related -dominant

-related

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; higher -administrative; higher -opportunism; lower -transaction; lower

-transaction; lower

The Tata Group has SBUs operating in a variety of industries, from automobiles to hospitality. The Tata Group is an example of which type of diversification? -single business -dominant business -unrelated -related

-unrelated

Which type of cost in a related-diversification strategy is a function of the number, size, and types of businesses that are linked? -influence -geographic -resource allocation -coordination

-coordination

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

-the parent-subsidiary relationship

Specialized assets have __. -low value in intended use -low opportunity cost -high value in next-best use -high opportunity cost

-high opportunity cost

A state university hires an outside firm to develop and maintain human resource system. This is called __. -offshoring -taper integration -vertical market failure -strategic outsourcing

-strategic outsourcing

Transaction costs include __ costs associated with an economic exchange. -only the internal -only the external -the legal -the internal and external

-the internal and external

When a business answers the question of where to compete, it is determining __. -business strategy -differentiation -corporate strategy -a marketing plan

-corporate strategy

The luxury car division of Tata Group, with the purchase of Jaguar and Land Rover, is pursuing which of the following on the business level? -a focused differentiation strategy -a broad cost leadership strategy -a focused cost leadership strategy -a broad differentiation strategy

-a focused differentiation strategy

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

-1 year or more

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 __. -a fully vertically integrated company -a horizontally disintegrated company -a vertically disintegrated company -parent-subsidiary relationship

-a fully vertically integrated company

To get the benefits of vertical integration without the accompanying risks, companies can __ (Check all that apply). -choose strategic outsourcing -use taper integration -control every element of the industry value chain -opt to become fully vertically integrated

-choose strategic outsourcing -use taper integration

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? -parent-subsidiary relationships -franchising -short-term contracts -joint ventures

-short-term contracts

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 -taper integration -franchising -vertical integration

-diversification

Which of the following is an option for formulating strategy via core competencies? -combine core competencies with rivals in new markets -leverage existing core competencies to improve current market position -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

Which of the following are the types of general diversification strategies? (Check all that apply.) -product-market -horizontal -vertical -market -product -geographic

-product-market -product -geographic

Long-term contracts (such as licensing and franchising), equity alliances, and joint ventures are examples of which of the following? -taper integration -transaction cost economics -offshoring -strategic alliances

-strategic alliances

Which of the following is an example of the principal-agent problem if the principal's goal is to create shareholder value? -a manager controls and limits his business expenses -a manager received generous stock options -a manager files first class on all business trips -a manager makes decisions based on what is best for the company

-a manager files first class on all business trips

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

-choose which activities to carry out within the firm

Which of the following are types of strategic alliances? (Check all that apply.) -equity alliances -parent-subsidiary relationship -long-term contracts -joint ventures -mergers

-equity alliances -long-term contracts -joint ventures

Kanya 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 __. -equity alliance -short-term contracts -franchising -licensing

-franchising

Why did Coca-Cola enter into a strategic alliance with Monster? -so that is 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 use Monster's trademark and business processes -so that it could have full control of Monster regardless of the risk

-so that is could gain private information to determine whether an acquisition might be beneficial

__ 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 -taper integration -vertical integration -horizontal integration

-taper integration

Which of the following are types of vertical integration along the industry value chain? (Check all that apply.) -forward -scheduled -simultaneous -backward

-forward -backward

Which of the following are among reasons firms need to grow? (Check all that apply.) -to increase costs -to increase profits -to decrease market power -to motivate management

-to increase profits -to motivate management

Zipster is a local manufacturer of athletic shoes. Zipster has decided it wants to expand to global markets and to offer a larger selection of items. It plans to offer not just athletic shoes but also luggage and car accessories. Zipster is engaging in __. -fully vertical integration -backward integration -diversification -equity alliances

-diversification

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

-high-powered incentives -increased flexibility

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

-vertical integration -diversification

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

-vertically integrate

In general, related diversification leads to high levels of performance because __. -it is unable to overcome coordination and influence costs -it allows the firm to focus on creating only one product or service -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

What is a related-linked diversification 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 only businesses where they can apply the resources and core competencies already available in the primary business -one in which executives purse various businesses opportunities that share only a limited number of linkages -one in which a firm's low- and mid-level workers convince executives to give them a change to decide corporate strategy

-one in which executives purse various businesses opportunities that share only a limited number of linkages

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

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

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

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

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

-marketing -sales -after-sales service and support

The forms of specialized assets include which of the following? (Check all that apply.) -relational specificity -operation specificity -physical-asset specificity -geographical specificity -human-asset specificity -site specificity

-physical-asset specificity -human-asset specificity -site specificity

What are the main types of corporate diversification? (Check all that apply.) -related diversification -single business -horizontal diversification -double business -unrelated diversification -dominant business

-related diversification -single business -unrelated diversification -dominant business

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

-superior goods to be replaced by interior ones

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

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

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

Which of the following is the term for the costs associated with an economic exchange? -economies of scope -diseconomies costs -transaction costs -PESTEL costs -core competencies -economies of scale

-transaction costs

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 -diversification premium -influence costs -economies of scale

-diversification discount

Advantages of vertical integration include which of the following? (Check all that apply.) -facilitating scheduling -an FTC challenge due to monopoly concerns -bettering quality -reducing costs -diversifying partnerships with other firms

-facilitating scheduling -bettering quality -reducing costs

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. -industry value chain -competing industry assessment -integrated materials model -joint integral framework

-industry value chain

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

-inverted U

What are the risks of vertical integration? (Check all that apply.) -reduced flexibility -consolidation -securing critical distribution channels -reduced quality -planned emergence -increased costs

-reduced flexibility -reduced quality -increased costs

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

-transaction-specific investments