Global | Ch 8 - Corporate Strategy & Vertical Integration and Diversification

Which of the following best illustrates forward vertical integration?

A firm that manufactures and sells car engines to major automobile companies launches its own line of cars

Silver Weave Inc., an apparel company, operates through a business model in which individuals can buy the rights to set up Silver Weave stores and sell the company's merchandise in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to stock the collection approved from the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate?

Franchising

________ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage.

Strategic alliances

Which of the following statements is true of transaction costs?

Transaction costs are necessary to explain and predict the boundaries of a firm.

How do firms benefit from vertical integration?

Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.

Which of the following firms is least integrated?

a firm that buys all the required raw materials from multiple external vendors

Neon Electronics Inc. sourced touch screens required for its tablet computers, cell phones, and televisions from a manufacturer in China. But the demand for such components was high globally, and the supplier could not meet the quality standards of Neon Electronics. Thus, Neon Electronics decided to set up its own unit to develop and manufacture the required touch screens. What does this scenario best illustrate?

backward vertical integration

Today, many companies use PeopleSoft and EDS to avoid maintaining a human resource management system. By doing this, these firms are

engaging in strategic outsourcing.

________ is best described as changes in an industry value chain that involve moving ownership of activities closer to the end (customer) point of the value chain

forward vertical integration

Symphon Times Inc., a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of the emerging nations. Which of the following types of diversification strategies is the firm pursuing?

geographic diversification strategy

A(n) ________ is best used to depict the transformation of raw materials into finished goods and services along distinct vertical stages

industry value chain

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?

principal-agent problem

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of

product diversification

BM Goods Inc. is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate?

product diversification

PepsiCo operates in many countries and sells a wide variety of aerated drinks, other beverages, different types of chips, and Quaker Oats goods to achieve continuous growth. From this data, we can conclude that PepsiCo has been involved in

product-market diversification

A firm that engages in strategic outsourcing typically

reduces its level of vertical integration.

When a firm is said to be pursuing a geographic diversification strategy, it means that the firm will

sell its products in several different regional, national, and international markets.

________ is best described as moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain.

strategic outsourcing

Which of the following is an example of an external transaction cost?

the cost of searching for a contract manufacturer

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

vertical integration