Strategic Management

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

true

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

vertical integration

When companies get involved in a bidding war and the winner overpays for the acquisition, the acquiring company has fallen victim to the ______.

winner's curse

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

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

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

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

What are three options used by executives to drive firm growth?

organic growth acquisitions alliances

A firm with alliance management capability is able to effectively manage which of the following tasks?

partner selection and alliance formation alliance design and governance post-formation alliance management

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

specialized assets

______ are unique assets with high opportunity cost.

specialized assets

In order for an alliance to qualify as ______, it must have the potential to alter a company's competitive advantage

strategic

A voluntary arrangement between firms to share knowledge, resources, and capabilities to develop products, processes, or services is known as a ______.

strategic alliance

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

strategic alliances

Which of the following is a reason why a firm needs to grow?

to reduce risk

Which of the following is the term for the costs associated with an economic exchange?

transaction costs

A conglomerate fits which type of corporate diversification model?

unrelated diversification

What are some advantages of strategic alliances?

They help firms achieve goals faster than they would alone. They might give companies a competitive advantage.

Horizontal integration can ______.

help a firm improve its strategic position in an industry

How do mergers and acquisitions differ?

A merger describes the joining of two independent companies, while an acquisition describes the purchase or takeover of a firm.

How does Lyft benefit from its strategic alliances with GM and Waymo?

It allows Lyft to more effectively compete against Uber.

In what way does the strategic alliance between GM and Lyft allow GM to hedge against uncertainty?

It gives GM access to the market of the future, in which traditional private car ownership no longer exists.

Which of the following are true of alliance management capability?

It involves partner selection and alliance formation. A firm may need to employ it with several different alliances.

Firms that pursue an unrelated diversification strategy and are unable to create additional value tend to experience which of the following?

a diversification discount

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

What allows firms to manage both strategic alliances and mergers and acquisitions?

a relational capability

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

a single market

Which of the following terms refers to when one firm purchases or takes over another firm?

acquisition

Which of the following are the three choices in the build-borrow-or-buy framework?

acquisition of new resources internal development strategic alliances

Strategists can grow their firms by growing organically through internal development or externally through alliances and ______.

acquisitions

At which level of the corporation should strategic alliances and mergers and acquisitions be managed?

at the corporate level

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

backward

Which of the following are types of vertical integration along the industry value chain?

backward forward

A conceptual model that helps strategists choose between seeking internal development, entering into an alliance, or acquiring new resources, capabilities, and competencies is called the "______ framework."

build-borrow-or-buy

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

choose strategic outsourcing use taper integration

__ 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

When a business answers the question of where to compete, it is determining ___.

corporate strategy

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

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

economies of scope economies of scale core competencies transaction costs

What are the three mechanisms that alliances can be governed by?

equity alliances non-equity alliances joint ventures

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

existing core competence--existing market

Companies that transact in the open market incur ______.

external transaction costs

True or false: Firms tend to enter strategic alliances when they have no other choice.

false

True or false: In most cases, mergers and acquisitions create competitive advantage.

false

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

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

grow

When two competitors merge, leading to industry consolidation, they are engaging in ______.

horizontal integration

The three mechanisms to govern alliances are non-equity alliances, equity alliances, and ______.

joint venture

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

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

Gaining new capabilities or competencies is one of the three main reasons companies ______.

make acquisitions

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

make managers owners through stock options

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

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

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

taper integration strategic outsourcing

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

Why do some firms choose alternatives to vertical integration?

to avoid the risks associated with vertical integration

Which of the following are reasons why firms enter into strategic alliances?

to enter new markets to strengthen their competitive position to learn new capabilities

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

to increase profits to motivate management

Why does Facebook acquire startups?

to preempt rivals

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

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

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

diversification and vertical integration

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

vertical market failure