Smartbook: Chapter 8

_____ costs are all of the costs associated with an economic exchange.

Transaction

What are the four quadrants of the core competence-market matrix? (Check all that apply.)

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

The first stage of the industry value chain is typically which of the following?

raw materials

A conglomerate fits which type of corporate diversification model?

unrelated diversification

Which types of diversification tend to have the lowest performances? (Check all that apply.)

unrelated diversification single business

An advantage of ______ is that it helps ensure that materials and distribution channels are available when needed.

vertical integration

Transaction costs include ______ costs associated with an economic exchange

the internal and external

The most integrated alternative to vertical integration is ______.

the parent-subsidiary relationship

What are advantages of organizing economic activity inside of a firm? (Check all that apply.)

1. command-and-control decisions 2.the creation of a community of knowledge 3.transaction-specific investments

When engaging in short-term contracting, a firm sends out________ _________ ______ to potential companies, which initiate competitive bidding for contracts to be awarded with a short duration.

Blank 1: requests or request Blank 2: for Blank 3: proposals or proposal

______ 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

______ are partnerships in which at least one partner takes partial ownership in the other partner.

Equity alliances

Each stage of the vertical value chain represents a distinct ______ in which a number of different firms are competing.

Industry

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

Vertical integration

Which of the following is the best option to take if you are the buyer and facing information asymmetry?

You should try to gather as much information as possible.

Olivia's, an olive oil company, grows and harvests olives, makes olive oil, and distributes its olive oil to its retail shop. Olivia's is an example of ______.

a fully vertically integrated company

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

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

a single market

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

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

dogs

Companies that transact in the open market incur ______.

external transaction costs

Which of the following are types of vertical integration along the industry value chain? (Check all that apply.)

forward backward

Kanye loves Benicio's Burritos and wants to open a branch in his hometown. Benicio's Burritos grants Kanye the right to use its trademark and name, and Kanye agrees to follow Benicio's Burritos guidelines. This is an example of ______.

franchising

A firm that is active in several different countries is pursuing a(n) ______ diversification strategy.

geographic

A ______ diversification strategy refers to a firm that pursues both product and geographic diversification.

product-market

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

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

strategic alliances

The degree of vertical integration corresponds to ______.

the number of industry value chain stages in which a firm directly participates

What is a 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

What is the purpose of the core competence--market matrix?

to provide guidance regarding how to diversify in order to grow the company

When a firm is more efficient in organizing economic activity than markets are, the firm should ______.

vertically integrate

What are advantages of organizing economic activity inside of a firm? (Check all that apply.)

1. transaction-specific investments 2. command-and-control decisions 3. the creation of a community of knowledge

Which national markets should the firm compete in?" is an example of a ______-level strategic question.

corporate

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

grow

Long-term contracts include which of the following forms? (Check all that apply.)

licensing franchising

What is a related-linked diversification strategy?

one in which executives pursue various businesses opportunities that share only a limited number of linkages

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

Which type of diversification is most likely to lead to superior performance?

related diversification

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

What is an advantage of a firm in organizing economic activity?

transaction-specific investments

The lemons problem suggests that information asymmetries can cause ___

superior goods to be replaced by inferior ones

____ is a theoretical framework that helps explain and predict the boundaries of the firm.

Transaction cost economics

Which of the following is the best option if a company wants to show strong commitment to a partner firm without acquiring that firm?

equity alliance

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

What are the risks of vertical integration? (Check all that apply.)

increased costs reduced flexibility reduced quality

Disadvantages of organizing economic activity in the open market include all of the following except ______.

increased flexibility

The risks of vertical integration are increased costs, reduced quality, reduced flexibility, and ______.

increased potential for legal repercussions

Which diversification strategy involves executives pursuing various business opportunities that share only a small number of similarities?

related-linked

The Boston Consulting Group growth-share matrix locates a firm's individual SBUs in which of the following dimensions? (Check all that apply.)

relative market share speed of market growth

What type of arrangement did Coca-Cola form with Monster in 2014?

an equity alliance

Stages four and five of the industry value chain involve ______. (Check all that apply.)

after-sales service and support sales marketing

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 carry out within the firm

According to the Boston Consulting Group matrix, cash cows are SBUs that do which of the following?

compete in a low-growth market but have high market share

Which of the following terms describes the strengths that allow a firm to distinguish itself from the competition?

core competencies

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

In general, related diversification leads to high levels of performance because ______.

it accesses numerous areas of value creation, such as economies of scale and scope

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

joint venture

Which of the following are alternatives on the make-or-buy continuum? (Check all that apply.)

joint ventures equity alliances

Which of the following is an option for formulating strategy via core competencies?

leverage existing core competencies to improve current market position

What level of diversification leads to the highest levels of performance?

moderate

Long-term contracts are classified as ______.

strategic alliances

The two alternatives to vertical integration are which of the following? (Select all that apply.)

strategic outsourcing taper integration

Which of the following describes economies of scope?

the savings from producing two or more outputs at less cost than producing each output individually

Which of the following is not a dimension along which corporate strategy is assessed?

the size of the company in comparison to its main competitors

A disadvantage of a short-term contract as an alternative on the make-or-buy continuum is that ______.

the supplying firm has little reason to perform transaction-specific investments

The ______ is a corporate planning tool in which the corporation is viewed as a portfolio of business units.

Boston Consulting Group (BCG) growth-share matrix

which of the following are characteristics of a joint venture?

It facilitates transaction-specific investments. It is a long-term commitment by two or more partners.

The persons responsible for forming corporate-level strategy are the __

executives

Wheels on the Go! is a company that manufactures tires for semitrucks. The company is entirely owned by North American Haulers, a large company in the semitruck industry. The two companies have formed a(n) ______.

parent-subsidiary relationship

What are the risks of vertical integration? (Check all that apply.)

reduced flexibility increased costs reduced quality

Advantages of vertical integration include which of the following? (Check all that apply.)

reducing costs bettering quality facilitating scheduling

When a multi-business firm pools and shares resources and leverages competencies across different business lines, it is following a(n) ______.

related diversification strategy

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

to reduce risk

Unlike short-term contracts, long-term contracts encourage firms to make ______ investments.

transaction-specific

Google's choice to hire programmers in-house suggests that they decided that the ______ costs associated with this strategy are ______ than the costs associated with contracting in the open market

transaction; lower

True or false: According to the make-or-buy continuum, strategic alliances are more integrated than short-term contracts.

true

True or false: Related diversification is more likely to generate incremental value than unrelated diversification.

true

Which of the following are types of strategic alliances? (Check all that apply.)

long-term contracts joint ventures equity alliances

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

corporate strategy

Advantages of organizing economic activity at the market level include which of the following? (Check all that apply.)

1. increased flexibility 2. high-powered incentives

Which of the following are among the reasons firms need to grow? (Check all that apply.)

1. to motivate management 2. to increase profits