Exam 2
If your company produces a basic mobile phone with limited features and wants to compete internationally, which strategy would the company most likely employ—a multidomestic strategy, a transnational strategy, or a global strategy?
A global strategy would work best since the same phone will be offered and most likely will require only very minor deviations from one country to another
If your company's product is large home appliances such as washing machines, ranges, ovens, and refrigerators, which strategy for competing internationally would your company most likely employ—a multidomestic strategy, a transnational strategy, or a global strategy?
A multidomestic strategy is recommended because of significant country-to-country differences in customer preferences, buying habits, and government regulations in the large appliance industry.
__________ could potentially be achieved through cost reductions stemming from strategic fit along the value chains of ITT's businesses.
Economies of scope
How has vertical integration aided the organization in building competitive advantage?
In-house manufacturing of key components and new parts that require frequent updates has enabled the company to learn quickly and launch new versions faster. Closer relationships between engineering and manufacturing give Tesla greater control over product design. *All of these choices are correct. Owning the distribution, sales, and servicing of the vehicles improves the customer experience.
Which of the following is not a strategic disadvantage of vertical integration?
It greatly reduces the opportunity for capturing maximum scale economies and achieving the lowest possible operating costs.
ITT's portfolio of business units reflects a strategy of
a combination of related and unrelated diversification.
Ethical principles in business
are not materially different from ethical principles in general and have to be judged in the context of society's standards of right and wrong, not by a special set of rules that business people decide to apply to their own conduct.
Notions of right and wrong, fair and unfair, moral and immoral, ethical and unethical
are present in all societies, organizations, and individuals.
For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company must
be able to achieve the same scale economies as outside suppliers and match or beat suppliers' production efficiency with no drop in quality
Which of the following is not a typical reason that many alliances do not live up to expectations?
disagreement over how to divide the added market share and profits gained from joint collaboration
According to ITT's website, the company began as a telephone and telegraph company; in the 1960s and 1970s it acquired businesses such as Sheraton Hotels, Avis Rent-a-Car, Hartford Insurance, and Continental Baking (the makers of Wonder Bread). These acquisitions, which were later divested, reflected a strategy of
mostly unrelated diversification.
Which of the following is not a potential advantage of backward vertical integration?
offers enhanced R&D capability, better opportunity to establish a core competence in supply chain management, more flexibility in incorporating state-of-the-art parts and components, and better overall product quality
Relying heavily on alliances and cooperative strategies can be most difficult when
one partner becomes dependent on one or more partners for essential expertise and capabilities.
Which of the following is not an advantage of utilizing a licensing strategy to participate in foreign markets?
the ability to safeguard the company's technical know-how or patents
Business ethics can be defined as
the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel.
To judge whether a particular diversification move has good potential for building added shareholder value, the move should pass the following tests:
the attractiveness test, the cost-of-entry test, and the better-off test.
First-mover disadvantages (or late-mover advantages) rarely arise when
the market response is strong and the pioneer gains a monopoly position that enables it to recover its investment
Multinational competitors tend to concentrate activities in a limited number of locations when
there are significant scale economies and/or steep learning curve effects associated with performing certain activities in a single location, costs of performing the activity are lower in particular geographic locations, and certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages.
As long as a single-business company can achieve profitable growth opportunities in its present industry,
there is no urgency to pursue a diversification strategy.
In which of the following situations is being first to initiate a particular move not likely to result in a positive payoff?
when potential buyers are skeptical about the benefits of a new technology or product being pioneered by a first mover
First-mover advantages are unlikely to be present in which one of the following instances?
when rapid market evolution (due to fast-paced changes in technology or buyer preferences) presents opportunities to leapfrog a first-mover's products with more attractive next-version products
Companies tend to concentrate their activities in a limited number of locations
when there is a steep learning curve associated with performing an activity.
Which one of the following is not a strategic choice that a company must make to complement and supplement its choice of one of the five generic competitive strategies?
whether to employ a low-cost strategy, a differentiation strategy, or a hybrid strategy
One of the biggest strategic challenges to competing in the international arena is
whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market to match the tastes and preferences of local buyers.
Which of the following statements is accurate concerning a company's environmental sustainability strategy?
Environmental sustainability consists of deliberate actions to protect the environment, provide for the longevity of natural resources, and maintain ecological support systems for future generations.
Which of the following statements about matching organizational structure to strategy execution is not correct?
Functional structures are common among companies pursuing some form of diversification strategy.
Véronique is the CEO of a wind power energy company headquartered in Toulouse, France. Identify which company model she would emulate to craft a multidomestic strategy.
Headquartered in Liverpool, England, Castrol produces over 3,000 different formulas of oil lubricants to meet the requirements of different climates, vehicle types and uses, and equipment applications that characterize different country markets.
Architects of mergers and acquisition strategies typically set sights on which of the following objectives?
Two answers are correct: creating a more cost-efficient operation, expanding a company's geographic coverage, and extending a company's business into new product categories, and gaining quick access to new technologies or other resources and competitive capabilities, and leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities
Dispersing the performance of value chain activities to many different countries rather than concentrating them in a few country locations tends to be advantageous
Two answers are correct: when high transportation costs make it expensive to operate from central locations; and whenever buyer-related activities are best performed in locations close to buyers.
Companies committed to environmental sustainability
adopt sustainable business practices that meet the needs of the present without compromising the ability to meet the needs of the future.
Which of the following is one of the eight principal managerial components associated with the process of implementing and executing strategy?
allocating ample resources to strategy-critical activities
Bonobos's Guideshop store concept enables men to have a personalized shopping experience in which they can try on clothing in any size or color and then have it delivered the next day to their home or office. This fashion retail concept is a good example of
an offensive strategy to seek uncharted waters and compete in blue oceans.
The advantages of manufacturing goods in a particular country and exporting them to foreign markets
are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold
The basic purpose of calculating competitive strength scores for each of a diversified company's business units is to
assess how strongly positioned each business unit is in its industry and the extent to which it already is or can become a strong market contender.
The multidomestic strategy of "think local, act local"
becomes more appealing when country-to-country differences in buyer tastes, cultural traditions, and market conditions vary significantly.
Which of the following is not an advantage of outsourcing the performance of certain value chain activities to outsiders?
being able to reduce distribution costs by eliminating the use of wholesale distributors and retail dealers and, instead, selling direct to end-users at the company's website
Using domestic plants as a production base for exporting goods to selected foreign country markets
can be an excellent initial strategy to pursue international sales.
Which of the following strategic business units generate operating cash flows over and above internal requirements, thereby providing financial resources that may be used to finance new acquisitions, fund share buyback programs, or pay dividends?
cash cows
The thesis that because different societies and cultures have divergent values and standards of what is "ethically right" and "ethically wrong," it is appropriate to judge behavior as ethical/unethical in the light of local customs and social mores
characterizes the school of ethical relativism.
Entering into strategic alliances and collaborative partnerships can be competitively valuable because
cooperative arrangements with other companies are very helpful in racing against rivals to build a strong global presence and/or racing to seize opportunities on the frontiers of advancing technology
Which of the following is an intangible or invisible cost that companies incur when ethical wrongdoing is disclosed?
costs of complying with often harsher government regulations
A "think global, act global" approach to strategy making is preferable to a "think local, act local" approach when
country-to-country differences are small enough to be accommodated with the framework of a mostly uniform global strategy.
Company strategies and value-creating processes can't be effectively executed without internal operating systems that include
customer data, employee data, supplier/partner data, operations data, and financial performance data.
Which of the following is the biggest strategic issue when competing in the markets of foreign countries?
determining whether to standardize or customize the company's offerings.
A "think local, act local" multidomestic type of strategy
employs essentially the same basic competitive strategy theme in all country markets.
Expedia's merger and acquisition of Home Away, Inc, did NOT have the following intended outcome?
enabling Expedia to lead the convergence of the travel and vacation rental industries, whose boundaries are being blurred by changing technologies and new market opportunities
Assessing the competitive advantage potential of cross-business strategic fit among the company's various business units involves
examining a company's costs relative to the costs of its chief rivals in the industry.
Merges and acquisitions are often driven by such strategic objectives as to
expand a company's geographic coverage, extend its business into new product categories, or gain quick access to new technologies or other resources and capabilities
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.
Social media giant Facebook Inc. decided to expand outside its home U.S. market in order to
gain access to new customers for the company's products/services.
The primary reasons that companies opt to expand into foreign markets are to
gain access to new customers, achieve lower costs, enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base.
Companies striving for global market leadership pursue strategic alliances or collaborative partnerships with foreign companies in order to
get into critical country markets quickly, gain inside knowledge about unfamiliar markets and cultures, and access valuable skills and competencies that are concentrated in particular geographic locations.
Experience indicates that strategic alliances
have a high "divorce rate."
The advantages of using a franchising strategy to pursue opportunities in foreign markets include
having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchiser to expend only the resources to recruit, train, and support foreign franchisees.
Aimée, owner of The Discerning Equestrian, a local apparel, tack, and equipment outlet, is facing growing competition from online retailers such as Equestrian.com. She has sought your student consulting team's advice about the staffing component in the managerial task of executing strategy. What would you not be likely to advise her to do?
hire only people below the age of 35 who have college degrees and a grade point average of B or better
The big risk of employing an outsourcing strategy is
hollowing out the competitive capabilities a company needs to be a master of its own destiny
If your company's product is dry soup mixes and canned soups, which strategy for competing internationally would your company most likely employ—a multidomestic strategy, a transnational strategy, or a global strategy?
A transnational approach is appropriate. Country-to-country customization to accommodate differences in taste preferences would most likely be necessary.
If your company's product is apparel and footwear, would a multidomestic strategy, a transnational strategy, or a global strategy seem to have more appeal?
A transnational strategy is preferred since apparel and footwear items can reflect global fashion trends while being customized as needed because of country-to-country differences in customer preferences and tastes.
What are the pros and cons of vertical integration in the industry?
A vertically integrated company performs value chain activities along more than one stage of the of the overall value chain.
When PepsiCo's management was considering the divestiture of a group of fast-food restaurant businesses (KFC, Pizza Hut, and Taco Bell), the following question was most likely asked:
"If we were not in this business today, would we want to get into it now?"
Integrated social contracts theory maintains that
"first order" universal ethical norms always take precedence over "second order" local ethical norms.
How has Wegmans demonstrated their commitment to their employees?
*All of the answers are correct. putting employee ideas into action creation of a broad benefits program competitive salaries policy of filling at least half of its open opportunities internally
What would be an advantage of a horizontal merger within the industry?
Acquisitions will increase the costs of a value chain; this cost increase can be countered by reducing administrative activities.
What are the ways that resource allocation contributes to good strategy execution and improved company performance?
Careful screening of requests for more people and new facilities and equipment, approving requests that hold promise, and turning down those that do not contribute to strategy execution.
What are the key features of Salesforce.com's culture?
The key features of the Salesforce.com's corporate culture include innovation, trust, customer success, and equality.
Which of the following is not a typical option that companies have to consider in order to tailor their strategy to fit the circumstances of developing country markets?
Develop new sets of core competencies that allow a company to offer value to consumers of emerging markets in ways unmatched by rivals.
Which one of the following statements concerning the impact of fluctuating exchange rates on companies competing in foreign markets is not true?
Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.
Of the following examples of value chain activities, which is unlikely to be a primary building block in the company's organizational structure?
In automobile manufacturing the critical value chain activities include raw materials procurement, offshore sourcing, and customer service.
In order to use location to build competitive advantage when competing on domestic and international level, a company must
In order to use location to build competitive advantage when competing on domestic and international level, a company must
How does the company's culture make Salesforce.com a good place to work?
It is viewed as a good place to work by those who would not succeed in a more traditionally managed company.
Which of the following help in changing an unhealthy or problematic company culture?
Management needs to be quickly and aggressively striving to ingrain new behaviors and work practices that will enable first-rate strategy execution, which may take a longer period of time.
Which one of the following statements explaining why merger and acquisition strategies typically fail is true?
Merger and acquisition strategies typically fail due to a misinterpretation of the cultural differences, like employee disenchantment and low morale, because of differences in management styles and operating procedures, and due to unforeseen challenges in integrating operations.
Which of the following is not an example of a company pursuing a blue ocean strategy?
Nordstrom in the retail industry
A blue ocean strategy
Offers growth in revenues and profits by discovering or inventing a new industry or distinct market segment that renders rivals largely irrelevant and allows a company to create and capture altogether new demand
What do you see as pros and cons of outsourcing in the business simulation?
Outsourcing involves contracting certain activities to outside specialists who have added resources and expertise.
Which of the following statements about entering developing markets such as China, India, Russia, and Brazil is correct?
Profitability always comes quickly to entrants into developing markets because of global branding.
Which of the following instances does not exemplify when a late-mover advantage arises?
Property rights protections in the form of patents, copyrights, and trademarks prevent the ready imitation of initial moves.
What factors build the business case for operating your company in an ethical manner?
Pursuing unethical strategies will damage a company's reputation and will result in a wide-ranging set of costly consequences.
What strategic fit benefits might be captured by transferring resources and competitive capabilities to newly acquired related businesses?
Strategic fit exists when company value chains are different and where leadership desires to learn the business of the acquired company.
What value chain segments has Tesla chosen to enter and perform internally?
Tesla has chosen to integrate forward in the value chain by owning the distribution, sales, and servicing network. Tesla has chosen to integrate backward in the value chain by manufacturing their own parts and components. *All of these choices are correct. Tesla has chosen to integrate forward in the value chain by building a network of supercharger stations.
Which one of the following is not a part of the business case for why companies should act in a socially responsible manner?
The aggressive pursuit of market share, revenues, and profits always puts the company in jeopardy of violating society's social responsibility expectations.
What are the ways that incentive compensation can affect productivity gains and lower labor cost per unit?
The more a manager understands what motivates subordinates and is able to use motivational incentives, the greater employees' commitment will be to good strategy execution and achievement of performance targets.
According to the triple bottom line, which of the following statements is not accurate?
The term "planet" refers to the company's overriding legal obligation to incorporate protection of the environment into its mission.
Which one of the following is not a part of the business case for why companies should act in a socially responsible manner?
To the extent that a company's socially responsible behavior wins applause from consumers and fortifies its reputation, a company may win additional patronage.
Corporate Strategy helps managers understand which strategy question?
Where should the firm compete?
On August 1, 2018, Reddit, an American social news aggregation, web content rating, and discussion website reported that it had been hacked. A spokesperson for Reddit said publicly, "think about whether there's anything on your Reddit account that you wouldn't want associated back to that address." The company also included instructions for users to remove their Reddit data. Do Reddit company managers have an obligation to observe ethical norms when crafting and executing a strategic response to this breach of data security and potential loss of consumer privacy?
Yes, because ethics in business are not materially different from ethical principles in general.
Do the features of Salesforce.com's culture influence the company's ethical practices? If so, how?
Yes, their commitment to trust, transparency, personal integrity, respect, and open communications establish behavioral guidelines and accepted work practices for their employees.
Has vertical integration strengthened its market position?
Yes. Tesla's vertical integration strategy has enabled it to quickly roll out innovative new products and launch the network that is required for widespread vehicle adaption.
The procedure for evaluating a diversified company's strategy involves all of the following steps except
a determination of the degree of risk involved with each business unit.
Which of the following is not an example of unrelated diversification?
a producer of snow skis and ski boots acquiring a maker of ski apparel and accessories (outerwear, goggles, gloves and mittens, helmets and toboggans)
Management's most powerful tool for mobilizing employee commitment to competent strategy execution and operating excellence is
a properly designed reward structure.
A company's strategy needs to be ethical because
a strategy that is unethical not only damages the company's reputation, but it also can have costly consequences.
Which of the following is not generally on a company's menu of actions to consider in crafting a strategy of social responsibility?
actions to provide suppliers, distributors, and other value chain partners with handsome profit margins
Areena is the diversity program manager in tech recruiting at Facebook. To nurture an adaptive culture that is sufficiently flexible to respond rapidly to changing business conditions, what are the most important characteristics of prospective employees that Areena needs to take into consideration? Why?
identifying which aspects of the present culture are supportive of good strategy execution and which ones are not
Which of the following makes acquisition an attractive approach to diversifying into another industry?
if it is quicker than trying to launch a brand-new operation, offers an effective way to hurdle entry barriers, and allows the acquirer to move directly to the task of building a strong position in the target industry
The competitive attraction of entering into strategic alliances and collaborative partnerships is
in allowing companies to bundle resources and competencies that are more valuable in a joint effort than when kept separate
How has Wegmans demonstrated their commitment to employee development?
investing in the training and education of its employees
The Nine-Cell Industry Attractiveness-Competitive Strength Matrix
involves assigning quantitative measures of industry attractiveness and competitive strength to plot each business's location on the matrix; the thesis underlying the matrix is that there are good reasons to concentrate the company's resources on those businesses having relatively strong competitive positions in industries with relatively high attractiveness and to invest minimally or even divest those businesses with relatively weak competitive positions in industries with relatively low attractiveness.
Total quality management (TQM)
is a philosophy of managing a set of business practices that emphasizes continuous improvement in all phases of operations, 100 percent accuracy in performing tasks, involvement and empowerment of employees at all levels, team-based work design, benchmarking, and total customer satisfaction.
Six Sigma quality control
is based on three principles: (1) all work is a process, (2) all processes have variability, and (3) all processes create data that explain variability.
In July 2018, the Papa John's pizza chain decided to distance itself from John Schnatter, its founder and pitchman, after it was reported that he had used a racial slur in a comment about black people. Mr. Schnatter apologized and resigned as chairman. The company said Mr. Schnatter's image, a fixture on its marketing materials, would be removed as the "first of several key steps to rebuild trust from the inside-out." Papa John's suddenly faced the tricky task of disentangling itself from its founder and convincing its customers and investors to move on, and also began considering whether or not to rebrand itself. Papa John's strategy needs to be ethical because
it is good business and in the best interest of shareholders.
Which of the following is not a characteristic of a compensation and reward system designed to help drive successful strategy execution?
keeping performance incentives and bonuses to less than 15 percent of total compensation
The chief difference between a "think global, act global" and a "think global, act local" approach to crafting a global strategy is that
local managers are given more latitude in adapting the global strategy approach as may be needed to accommodate local buyer preferences and be responsive to local market and competitive conditions.
The purpose of defensive strategies include
lowering the risk of being attacked by rivals, weakening the impact of any attack that occurs, and influencing challengers to aim their offensive efforts at other rivals
According to the school of ethical universalism
many of the same standards of what's ethical and what's unethical resonate with peoples of most societies regardless of local traditions and cultural norms; hence, to the extent there is common moral agreement about right and wrong actions, common ethical standards can be used to judge the conduct of personnel at companies operating in a variety of country markets and cultural circumstances.
Mergers and acquisitions strategies
may offer considerable cost-saving opportunities and can be beneficial in helping a company try to invent a new industry and lead the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities
Wegmans demonstrates their interest in including their employees in their decision making by providing which of the following?
open-door days, team huddles, and focus groups with senior management
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
parenting advantage.
A good example of backward vertical integration is a
producer of organic vegetables deciding to acquire a compost company
Which of the following would not generate a strategic fit among ITT's business units?
provide low-level oversight and make available minimal corporate resources
How has Wegmans motivated their employees through attractive perks and fringe benefits?
providing flexible or compressed schedules, policies that extend to same-sex partners, and above average wages
Which of the following is not an important nonmonetary approach to enhancing motivation and helping drive successful strategy execution?
providing rank-and-file employees with representation on the company's board of directors
Companies like Amazon, Apple, Facebook, and Google employ all but one of the following offensive actions to complement and supplement the choice of one of the five generic competitive strategies. Which is not an example of an offensive move?
pursuing a market share leadership strategy
Which of the following is an example of an offensive strategy?
pursuing continuous product innovations to draw sales and market share away from less innovative rivals
Bumble, a digital dating site where women make the first move, specifically uses which strategic weapon in its offensive arsenal?
pursuing disruptive product innovations to create new markets
Companies that adopt the principle of ethical relativism in providing ethical guidance to company personnel
quickly find themselves on a slippery slope with no ethical standards or principles of their own.
Among the purposes of defensive strategies are to
restrict a competitive attack by a challenger, weaken the impact of any attack that occurs, and influence challengers to aim their offensive efforts at other rivals.
Calculating quantitative attractiveness ratings for the industries a company has diversified into involves
selecting a set of industry attractiveness measures, weighting the importance of each measure (with the sum of the weights adding to 1.0), rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to evaluate the attractiveness of all the industries, both individually and as a group.
Ranking a diversified company's businesses in terms of priority for resource allocation and new capital investment
should be done principally on the basis of which businesses offer the best prospects (given their industry attractiveness and competitive strength) and have solid and appealing strategic fits and resource fits.
Experience indicates that strategic alliances
stand a reasonable chance of helping a company reduce competitive disadvantage, but very rarely form the basis of a durable competitive advantage over rivals
Economies of scope
stem from cost-saving strategic fits along the value chains of related businesses.
A hit-and-run or guerrilla warfare type of offensive strategy involves
surprising moves by small challengers that have neither the resources nor the market visibility to mount a full-fledged attack on industry leaders.
Which of the following is NOT among the intended outcomes of horizontal merger and acquisition strategies?
suspending a rival's breakthroughs in management or technology
The defining characteristic of unrelated diversification (as opposed to related diversification) is
that the value chains of different businesses are so dissimilar that no competitively valuable cross-business relationships are present (in other words, the value chains of a company's businesses offer no opportunities to benefit from skills or technology transfer across businesses, economies of scope, cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities).
For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company must posses
the capability to achieve the same scale economies as outside suppliers and also match or beat suppliers' production efficiently with no drop in quality
The theory of corporate social responsibility concerns
the company's responsibility to balance between strategic actions to benefit shareholders against the duty to be a good corporate citizen.
According to integrated social contracts theory,
the ethical standards a company should try to uphold are governed both by (1) a limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions and behavior in all situations, and (2) the circumstances of local cultures, traditions, and shared values that further prescribe what constitutes ethically permissible behavior and what does not; however, universal ethical norms take precedence over local ethical norms.
Imagine that you are advising the CEO of a of a diversified corporate event-planning business that is considering broadening the company's business scope, for example, by building positions in new related or unrelated businesses such as providing corporate campus food services and corporate conference facilities. You would advise the CEO to pursue a diversification strategy for all of the following reasons except
the parent company has enough cash hog businesses to supply capital to its cash cow businesses.
The defining characteristic of related diversification (as opposed to unrelated diversification) is
the presence of cross-business value chain relationships and strategic fits.
Which one of the following is not something that shapes and helps define a company's culture?
the strategy and business model that the company has adopted
The rationale for making strategy-critical value chain activities the primary building blocks in a company's organizational scheme is based on
the thesis that if activities crucial to strategic success are to have the resources, decision-making influence, and organizational impact they need, they have to be centerpieces in the organizational scheme.
If one adopts the thinking of the school of ethical relativism, then
there are multiple sets of ethical standards because what is ethical or unethical depends on local customs and social mores and can vary from one culture or nation to another.
Which of the following is typically the strategic impetus for forward vertical integration?
to gain better access to end users and better market visibility
For an enterprise to execute its strategy in truly proficient fashion and approach operating excellence,
top executives must take the lead in the implementation/execution process and personally drive the pace of progress.
Leading the effort to instill a spirit of high achievement into Goldman Sachs's culture and putting constructive pressure on the organization to achieve good results in a successful manner was primarily contingent
treating employees with dignity and respect, celebrating individual, group, and company successes, and setting stretch objectives.
Which of the following is NOT a strategic disadvantage of vertical integration?
vertical integration limits a company's ability to achieve greater product differentiation and to exercise direct control over the costs of performing value chain activities
Imagine that you are the CEO of a multinational corporate consumer food company. What would make it attractive to you to consider related diversification via acquisition rather than unrelated diversification into a new industry, such by forming an internal startup subsidiary to enter and compete in the target industry?
when the incumbent industry enables your company to create strategic fits with the acquired firm in order to exploit cross-business value chain activities and resource similarities that could lead to more efficient production, distribution, and sale of profitable processed food products