Chapter 8 Quiz

10) Which of the following firms is most prone to experiencing a diversification discount?

A company that pursues unrelated diversification.

1) Which of the following firms is least integrated?

A firm that buys all the required raw materials from multiple external vendors.

________is best described as an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes.

Diversification

2) Silver Weave Inc., an apparel company, operates through a business model in which individuals can buy the rights to set up Silver Weave stores and sell the company's merchandise 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 stock the collection approved from 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

6) Which of the following alternatives on the Make-or-buy continuum allows for most integration?

Parent-subsidiary relationship

7) The smartphone division of the large consumer electronics company, True Electra Inc., has a significant market share in the fast growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growth-share matrix, the smart phone division of True Electra will be categorized under

Stars

5) How do firms benefit from vertical integration?

Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.

3) Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

Vertical integration.

4) Each stage of the vertical value chain typically represents a distinct _________in which a number of different firms are competing.

Industry

_________is best described as moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain.

Strategic outsourcing