Chapter 8

Corporate strategy is focused solely on determining the geographic locations in which the firm should compete.

False

Managers have exactly two choices when determining the boundaries of the firm: produce goods and services in-house ("make") or purchase them externally ("buy").

False

________ is best described as a situation in which one party is more informed than another, because of the possession of private information.

Information asymmetry

Argus Inc. is a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company?

a conglomerate

The managers at Camphor Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector?

by having higher performance in another sector

Mondo Tacos, a fast food restaurant, operates through a business model in which individuals can buy the rights to set up Mondo Taco stores and sell the company's food 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 offer a menu approved by 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

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.

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

the cost of searching for a contract manufacturer

Gold Leaf Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Gold Leaf has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Gold Leaf should

vertically integrate.

Anita has been named CEO of a popular sports apparel company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Anita most likely to make?

what range of products the firm should offer