Vertical Integration

false

firms should only bring market exchanges within their boundaries when the cost of vertical integration is more than the cost of opportunism

forward vertical integration

when apple opened retail stores to sell its computers, this is an example of

uncertain

A decision-making setting is ______ when the future value of an exchange cannot be known when investments in that exchange are being made.

false

Firms should avoid vertically integrating in those businesses where they possess valuable, rare, and costly-to-imitate resources and capabilities.

false

If Wal-Mart were to purchase a factory to make socks and it planned to sell these socks in its stores, this would be an example of forward vertical integration.

firm-capabilities based

If a computer company decided to open its own call centers to provide technical support to its corporate customers because the employees in these call centers need a significant level of in-depth training that was highly specialized to the computer company's products, this would be consistent with which explanation of vertical integration?

Flexibility-based

If a firm decided to maintain relationships with several different call center management companies, each of which have adopted different technological solutions to the problem of how to use call center employees to assist customers who are using very complex products, to reduce the uncertainty of whether the people staffing the phone can help the firm's customers, this would be consistent with which explanation of vertical integration?

True

If a firm engages in vertical integration into a business activity where it does not possess any of the valuable, rare, or costly-to-imitate resources it needs to gain a competitive advantage, it may find itself at a competitive disadvantage to the extent that some firms already have competitive advantages in these business activities.

true

If a supplier is overly reliant on a single customer, this supplier can be at risk of opportunism on the part of the customer.

false

When companies staffed and operated their own call centers in the United States, they were engaging in backward vertical integration, but when they started using independent companies in India to staff and operate these centers, they were more vertically integrated.

outsourcing

___ can help firms reduce costs and focus their efforts on those business functions that are central to their competitive advantage.

true

decisions about whether to vertically integrate often determine whether or not a firm is operating in a single business or industry or multiple.

trx-specific investments

make parties to an exchange vulnerable to opportunism, and vertical integration solves this vulnerability problem.

false

more vertically integrated firms accomplish fewer stages of the value chain within their boundaries than less vertically integrated firms

flexibility

refers to how costly it is for a firm to alter its strategic and organizational decisions

flexibility

refers to how costly it is for a firm to alter its strategic/org decisions and is valuable ONLY when the decision-making setting a firm is facing is uncertain

vertical integration

the number of steps in a firm's value chain that it accomplishes within its boundaries describes the

false

the threat of opp is least when a party has made trx-specific investments

firm-specific investments

transaction-specific Investments made by employees that have more value in a particular company than in alternative companies are known as

corporate strategy

vertical integration is a type of

opportunism

when a firm is unfairly exploited in an exhcange; when one firm's exchange partners behave this way, it reduces the economic value of the firm.

true

A flexibility-based approach to vertical integration suggests that when the decision-making setting regarding a business activity is highly uncertain, firms should form a strategic alliance to enter this activity instead of vertically integrating.