MAN 4720 CH 8

What are the main types of business diversification?

- dominant business - unrelated diversification - related diversification - single business

Taper integration allows firms to

- gain knowledge from external sources - be more flexible when responding to market changes such as fluctuations in demand.

Advantages of organizing economic activity at the market level include which of the following?

- increased flexibility - high powered incentives

Which of the following are advantages of organizing economic activity OUTSIDE of a firm?

- lower administrative costs - high powered incentives

Stages four and five of the industry value chain involve

- marketing - sales - after-sales service and support

The four quadrants of the core competence-market matrix are which of the following?

- new competencies with new markets - existing competencies with new markets - new competencies with existing markets - existing competencies with existing markets

_______ costs refer to the costs that arise from managing the linked businesses in a related-constrained or related-linked diversification scenario.

Coordination

______ refers to an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes.

Diversification

T or F. According to studies, companies with taper integration tend to have inferior financial performance and lower levels of innovation than ones with more vertical integration.

FALSE

________ assets are unique assets that have significantly more value in their intended use than in next-best use.

Specialized

Which of the following is a fundamental corporate-level strategic decision?

What products and services should the firm offer?

The luxury car division of Tata Group, with the purchase of Jaguar and Land Rover, is pursuing which of the following on the business level?

a focused differentiation strategy

In a fully vertically integrated organization,

all stages of the industry value chain are conducted within the firm

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

backward

Transaction cost economics help managers do which of the following?

choose which activities to do within the firm

In order to assess whether ________ is working, managers can ask if the individual businesses are worth more under the firm's management or if they are worth more under individual management.

diversification

TWN, a large multinational corporation, chose to spin off one of its SBUs which was unrelated to TWNs core business in order to avoid the ______ ___________. WHen they announced the spin off, the stock price of TWN went up by 5%.

diversification discount

In the Boston Consulting Group matrix, ______ hold the small market share in a low-growth market.

dogs

A firm that is active in several different countries is pursuing a _______ diversification strategy.

geographic

The global off-shoring market is expected to ________ in the future.

grow quickly

The ______ depicts the transformation of raw materials into finished goods and services along distinct vertical stages, each of which represents a distinct industry in which a number of different firms are competing.

industry value chain

_______ is a situation in which one party has more knowledge than another due to the possession of private knowledge.

information asymmetry

___________ refers to the act of of outsourcing some of the firm's activities outside of the home country to another nation.

offshoring

Which of the following behaviors is characterized by self-interest with guile?

opportunism

A __________ diversification strategy refers to a firm that pursues both product and geographic diversification`

product-market

_______ are perhaps the major drawback of transacting in markets.

search costs

The BCG growth-share matrix requires managers to view their SBUs in terms of relative market ________ and speed of market ___________.

share ; growth

A state university hires an outside firm to develop and maintain their human resource system. This is called

strategic outsourcing

____________ refers to moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain.

strategic outsourcing

Transaction costs include ______ costs associated with an economic exchange.

the internal and external

What is the major disadvantage of organizing economic activity within firms?

the principal-agent problem

Why do some firms choose alternatives to vertical integration?

to avoid the risks associated with vertical integration

______ is an advantage of a firm in organizing economic acitvity.

transaction-specific investments

___________ refers to the firms' ownership of its production of needed inputs or of the channels by which is distributes its outputs

vertical integration

How long do long-term contracts typically last?

1 year or more

__________ and ________ are the two types of long-term contracts.

Licensing ; franchising

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

- taper integration - strategic outsourcing

___________ is a way of orchestrating value activities in which a firm is backwardly or forwardly integrated and relies on outside-market firms for suppliers or distribution.

Taper integration

A disadvantage of using a short-term contract for the supplying firm is that they

have little reason to perform transaction-specific investments

The risks of vertical integration are increased costs, reduced quality, reduced flexibility, and which of the following?

increased potential for legal repercussions

_______ is an example of an alternative arrangement located on the continuum between "buying" and "making."

short-term contracting

Why did Coca-Cola enter into a strategic alliance with Monster?

so that it could gain private information to determine whether an acquisition might be beneficial

Alternatives in the make-or-buy continuum include which of the following?

- equity alliances - joint ventures

A firm follows a(n) ________ diversification strategy when it derives less than 70% of its revenues from a single business activity and obtains revenues from other lines of business that are linked to the primary business activity.

related

A benefit of ___________ is that in-house suppliers and distributors are subjected to market competition, which allows the firm to assess performance in comparison to others.

taper integration

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

transaction costs

_____________ refers to the assets whose physical and engineering properties are designed to satisfy a particular customer.

physical-asset specificity

The forms of specialized assets include which of the following?

- physical-asset specificity - human-assist specificity - site specificity

Which of the following are the types of general diversification strategies?

- product-market - geographic - product

What are the risks of vertical integration?

- reduced quality - reduced flexibility - increased costs

A(n) ________ is a standalone organization created and jointly owned by two or more parent companies.

joint venture

One way to overcome the principal-agent problem is to

make managers owners through stock options

In the taper integration system, a firm has ________ reliance on outside markets.

partial

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

- economies of scale - economies of scope - core competencies - transaction costs

Advantages of vertical integration include which of the following?

- facilitating scheduling - bettering quality - reducing costs

Which types of diversification tend to have the lowest performance?

- single business - unrelated diversification

The persons responsible for forming corporate-level strategy are the

executives

A(n) _________ is a voluntary arrangement between firms that involve sharing of resources and capabilities with the intent of developing processes, products, or services.

strategic alliance

Why might a firm want to enter into an equity alliance instead of a short or long term contract?

- to get insider information about the partner's business - to facilitate transaction-specific investments - to make a credible committment

Corporate strategy needs to be dynamic over time in order

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

Kava Botanicals, a boutique retailer that sells high-end makeup and accessories, is owned by two makeup manufacturers, Kava Botanicals is an example of which strategic alliance?

a joint venture