Ch. 8 hwks

______ costs are all of the costs associated with an economic exchange.

Transaction

Which of the following are among the reasons firms need to grow?

-to increase profits -to motivate management

True or false: "Make" and "buy" are the only two choices in the continuum.

False

True or false: A firm might want to enter into an equity alliance instead of a short- or long-term contract to allow the partner to use the firm's trademark and business processes.

False

True or false: A firm might want to enter into an equity alliance instead of a short- or long-term contract to facilitate transaction-specific investments.

False

True or false: Crowdsourcing is an alternative on the make-or-buy continuum.

False

True or false: Mergers and parent-subsidiary relationship are types of strategic alliances.

False

Which corporate diversification component is most often tied to good performance?

Related diversification

What is the process of reorganizing activities to refocus a firm?

Restructuring

________ describes the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully.

Restructuring

______ 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.

Taper integration

Which of the following statements about the make-or-buy continuum is true?

The "make" and "buy" choices anchor each end of the continuum.

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: The strategy of the firm is not determined by whether they should make or buy.

True

______ refers to the firms' ownership of its production of needed inputs or of the channels by which it distributes its outputs.

Vertical integration

In the Boston Consulting Group growth-share matrix, each of the four categories in the matrix represents ______.

a different investment strategy

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 flying first class on all business trips

A non-diversified company focuses on which of the following?

a single market

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

backward

According to the Boston Consulting Group matrix, stars are SBUs that do which of the following?

compete in a high-growth market and have high market share

According to the Boston Consulting Group matrix, dogs are SBUs that do which of the following?

compete in a low-growth market and have low market share

According to the Boston Consulting Group matrix, cash cows are SBUs that do which of the following?

compete in a low-growth market but have high market share

A ______ is diversified, but the business are not related.

conglomerate

Which of the following terms describes the strengths that allow a firm to distinguish itself from the competition?

core competencies

The key question of where to compete is addressed by ___.

corporate strategy

Which of the following would be as a result of information asymmetry?

crowding out of desirable goods and services by inferior ones.

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

diversification discount

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

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

dogs

Which of the following is the best option if a company wants to show strong commitment to a partner firm without acquiring that firm?

equity alliance

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

equity alliances

The persons responsible for forming corporate-level strategy are the ___.

executives

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

existing competence--existing market

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

existing core competence--existing market

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

forward

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

When all activities of the value chain are conducted within the boundaries of the firm, the firm is said to be ______.

fully vertically integrated

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

Owning the supply chain can come with ______ risks than relying on external supply chains.

greater

Amazon's continued focus on ______ is a key to its ongoing success.

innovation

A(n) __ is a standalone organization created and jointly owned by two or more parent companies.

joint venture

Higher levels, as well as lower levels, of diversification are generally associated with ________ overall performance.

lower

One way to overcome the principal-agent problem is to ______.

make managers owners through stock options

What level of diversification leads to the highest levels of performance?

moderate

Individual transactions have ____ planning period and short-term contracts actually allow for a short planning period.

no

What is an unrelated 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

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.

related

When a multi-business firm pools and shares resources and leverages competencies across different business lines, it is following a(n) ______.

related diversification strategy

To figure out if a firm's type of diversification is ______, one can ask questions about the degree to which the corporation's business units share core competencies.

related or unrelated

Which diversification strategy involves executives pursuing various business opportunities that share only a small number of similarities?

related-linked

When engaging in short-term contracting, a firm sends out _____ (RFPs) to potential companies, which initiate competitive bidding for contracts to be awarded with a short duration.

requests for proposals

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

In the taper integration system, a firm has ______ reliance on outside markets.

some

Which of the following have significantly more value in their intended use than in their next-best use?

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.

strategic alliance

Transaction costs include ______ costs associated with an economic exchange.

the internal and external

The degree of vertical integration corresponds to ______.

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

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

the principal-agent problem

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

Why do some firms choose alternatives to vertical integration?

to avoid the risks associated with vertical integration

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

transaction-specific

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

Tata is a conglomerate successfully using a(n) _____ strategy.

unrelated diversification

What are the main types of corporate diversification?

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

What is a tool used in corporate portfolio planning?

Boston Consulting Group (BCG) growth-share matrix

The two alternatives to vertical integration are which of the following?

-taper integration -strategic outsourcing

Long-term contracts typically last ______.

1 year or more

______ refers to an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes.

Diversification

______ refers to the assets whose physical and engineering properties are designed to satisfy a particular customer.

Physical-asset specificity

To get the benefits of vertical integration without the accompanying risks, companies can ______

-choose strategic outsourcing -use taper integration

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

-speed of market growth -relative market share

____ strategy involves the decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously.

Corporate

Specialized assets have ______.

high opportunity cost

Long-term contracts are classified as ______.

strategic alliances

The lemons problem suggests that information asymmetries can cause ______.

superior goods to be replaced by inferior ones

The relationship between the type of diversification and overall firm performance ______.

takes on the shape of an inverted U so related diversification has the best performance

Shaniqua's Shirts uses both in-house and outside suppliers and also sells its shirts through its own retail stores and through independent retailers. Shaniqua's Shirts uses ______.

taper integration

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

Inverted U

______ facilitate transaction-specific investments.

Long term contracts

The selling of Busch Entertainment, a theme park unit that owns SeaWorld, by Belgium-based AB InBev after the acquisition of Anheuser-Busch by InBev to ensure a focus on AB InBev's core business, is an example of ______.

restructuring

What happens when the markets along the industry value chain are too risky and alternatives too costly in time or money?

vertical market failure

When HTC, a manufacturer of phone hardware, started to design its own smartphones, HTC engaged in ______.

backward vertical integration

A conglomerate fits which type of corporate diversification model?

unrelated diversification

Securing critical supplies, lowering costs, improving quality, facilitating scheduling and planning, and facilitating investments in specialized assets are all benefits of ______.

vertical integration

Strategic business units that compete in a low-growth market but hold considerable market share are called ________. Their earnings and cash flows are high and stable.

cash cows

Which of the following are types of strategic alliances?

-equity alliances -joint ventures -long-term contracts

An advantage of a short-term contract as an alternative on the make-or-buy continuum is that ______.

the supplying firm has a longer planning period in comparison to individual market transactions

Why might a firm want to enter into an equity alliance instead of a short- or long-term contract?

-To signal greater commitment to the partnership. -To take partial ownership in the other partner by buying stock or assets.

The fact that Apple is able to secure critical supplies and facilitate investments in specialized assets (chips for Apple) is considered a(n) ______.

benefit of vertical integration

When a firm is more efficient in organizing economic activity than markets are, the firm should ______.

vertically integrate

In order for a firm to lower costs, it must ______.

grow

What is a related-linked diversification strategy?

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

Long-term contracts include which of the following forms?

-licensing -franchising

_______ refers to changes in an industry value chain that involve moving ownership of activities upstream.

Backward integration

True or false: Short-term contracts are the most costly option in the continuum.

False

True or false: The "buy" choice reflects full integration.

False

discount

The fact that the stock price rose indicates that TWN had not created value in owing the SBU, so the diversification from acquiring the SBU had resulted in a _______ in the total value of the firm.

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

True

True or false: 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 joint venture

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

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 ______.

diversification

The relationship between the type of diversification and overall firm performance takes on the shape of an inverted U, where single business or unrelated diversification lead to ______ levels of performance than a modest diversification level also known as related diversification.

lower

What is the opportunity cost of investing in specialized assets that is characterized by self-interest seeking with guile?

opportunism

Which of the following describes economies of scope?

the savings from producing two or more outputs at less cost than producing each output individually

Long-term contracts (such as licensing and franchising), equity alliances, and joint ventures are examples of which of the following?

strategic alliances

What are the three dimensions along which executives formulate corporate strategy?

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

Amazon's explosive success is largely due to which of the following?

-diversification -vertical integration

Which of the following are the four underlying strategic management concepts that determine the scope of a firm?

-economies of scale -core competencies -transaction costs -economies of scope

Corporate strategy needs to be dynamic over time in order to ______.

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

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

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

-new competencies with new markets -existing competencies with new markets -new competencies with existing markets -existing competencies with existing markets

What is licensing?

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

What is a related-constrained diversification strategy?

one in which executives pursue only businesses where they can apply the resources and core competencies already available in the primary business