Strategic Management Chapter 8

Transaction cost economics help managers do which of the following? Multiple choice question. understand which new products to commercialize avoid paying transaction costs make sure that the firm can fulfill its taxpayer responsibilities choose which activities to carry out within the firm

Choose which activities to carry out within the firm

______ costs are all of the costs associated with an economic exchange. Multiple choice question. Opportunity Transaction Competency Horizontal

Transaction

______ refers to the firms' ownership of its production of needed inputs or of the channels by which it distributes its outputs. Multiple choice question. Industry value chain Horizontal integration Vertical integration Subsidiary relationship

Vertical integration

Companies that transact in the open market incur ______. Multiple choice question. staffing costs dividends internal transaction costs external transaction costs

external transaction costs

Which of the following are types of vertical integration along the industry value chain? (Check all that apply.) Multiple select question. backward forward scheduled simultaneous

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 ______. Multiple choice question. short-term contracts equity alliance licensing franchising

franchising

In order for a firm to lower costs, it must ______. Multiple choice question. grow increase risks lower profits lower its expectations

grow

Which of the following are types of strategic alliances? (Check all that apply.) Multiple select question. joint ventures long-term contracts mergers equity alliances parent-subsidiary relationship

joint ventures long-term contracts equity alliances

Stages four and five of the industry value chain involve ______. (Check all that apply.) Multiple select question. sales marketing final assembly manufacturing after-sales service and support

sales marketing after-sales service and support

The two alternatives to vertical integration are which of the following? (Select all that apply.) Multiple select question. nominal innovation specialized disintegration strategic outsourcing taper integration horizontal integration

strategic outsourcing taper integration

Which of the following are among the reasons firms need to grow? (Check all that apply.) Multiple select question. to motivate management to increase costs to decrease market power to increase profits

to motivate management to increase profits

Long-term contracts (such as licensing and franchising), equity alliances, and joint ventures are examples of which of the following? Multiple choice question. transaction cost economics strategic alliances taper integration offshoring

Strategic Alliances

Long-term contracts are classified as ______. Multiple choice question. acquisitions strategic alliances parent-subsidiary relationships activities performed in-house

Strategic Alliances

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

True

To get the benefits of vertical integration without the accompanying risks, companies can ______. (Check all that apply.) Multiple select question. opt to become fully vertically integrated control every element of the industry value chain choose strategic outsourcing use taper integration

choose strategic outsourcing use taper integration

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

corporate

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. Multiple choice question. competing industry assessment integrated materials model joint integral framework industry value chain

industry value chain

One way to overcome the principal-agent problem is to ______. Multiple choice question. establish coordination and flexibility specify information symmetries offer managers communities of knowledge make managers owners through stock options

make managers owners through stock options

A(n) ______ is a voluntary arrangement between firms that involves sharing of resources and capabilities with the intent of developing processes, products, or services. Multiple choice question. strategic alliance short-term contract parent-subsidiary relationship industry-value chain

strategic alliance

Transaction costs include ______ costs associated with an economic exchange. Multiple choice question. the internal and external only the internal the legal only the external

the internal and external

Which of the following statements about the make-or-buy continuum is true? Multiple choice question. The "buy" choice reflects full integration. Short-term contracts are the most costly option in the continuum. "Make" and "buy" are the only two choices in the continuum. The "make" and "buy" choices anchor each end of the continuum.

The "make" and "buy" choices anchor each end of the continuum.

What happens when the markets along the industry value chain are too risky and alternatives too costly in time or money? Multiple choice question. horizontal market failure related diversification failure unrelated diversification failure vertical market failure

vertical market failure

Long-term contracts typically last ______. Multiple choice question. indefinitely 1 year or more 1 to 2 months 6 to 12 months

1 year or more

______ are unique assets with high opportunity cost. Multiple choice question. Diversified strategies Horizontally integrated assets Equity alliances Specialized assets

Specialized assets

______ is a theoretical framework that helps explain and predict the boundaries of the firm. Multiple choice question. Economics of scope Planned disadvantaged theory Corporate-level strategy Transaction cost economics

Transaction cost economics

If a company moves ownership of activities closer to the end customer, such as providing after-sales support, it is engaging in ______ vertical integration. Multiple choice question. backward forward scaled full

forward

Long-term contracts include which of the following forms? (Check all that apply.) Multiple select question. franchising joint ventures exporting agreements licensing

franchising licensing

Each stage of the vertical value chain represents a distinct ______ in which a number of different firms are competing. Multiple choice question. industry platform continuum alliance

industry

Which type of alternative on the make-or-buy continuum involves competitive bidding by external companies hoping to acquire a temporary arrangement with a firm? Multiple choice question. short-term contracts joint ventures franchising parent-subsidiary relationships

short-term contracts

Long-term contracts are classified as ______. Multiple choice question. acquisitions activities performed in-house parent-subsidiary relationships strategic alliances

strategic alliances

The degree of vertical integration corresponds to ______. Multiple choice question. the number of industry value chain stages in which a firm directly participates the firm's level of integration among the alternative industry types the firm's level of integration with the host country's infrastructure the number of parent-subsidiary relationships a firm is involved in

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

What is a major disadvantage of organizing economic activity within firms? Multiple choice question. enforcement of contracts search costs transaction-specific investments the principal-agent problem

the principal-agent problem

Which of the following is a reason why a firm needs to grow? Multiple choice question. to balance market power to increase costs to increase risk and thus become competitive to reduce risk

to reduce risk

One way to overcome the principal-agent problem is to ______. Multiple choice question. make managers owners through stock options specify information symmetries establish coordination and flexibility offer managers communities of knowledge

make managers owners through stock options

True or false: It can be riskier to own parts of the supply chain than to rely on external supply chains. True false question. True False

True

Which of the following is a reason why a firm needs to grow? Multiple choice question. to balance market power to increase risk and thus become competitive to increase costs to reduce risk

to reduce risk

The first stage of the industry value chain is typically which of the following? Multiple choice question. raw materials sales components intermediate goods

raw materials

Specialized assets have ______. Multiple choice question. high value in next-best use Reason: No, specialized assets have significantly more value in their intended use than in their next-best use. low opportunity cost low value in intended use high opportunity cost

High opportunity cost

Which of the following is not a dimension along which corporate strategy is assessed? Multiple choice question. the size of the company in comparison to its main competitors the stages of the industry value chain in which the business participates the range of products and services the business offers where (geographically) to compete

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 ______. Multiple choice question. the supplying firm has little reason to perform transaction-specific investments the buying firm can get a lower price for the work because of the competitive bidding process the supplying firm has a shorter planning period than it has for individual transactions the supplying firm has a longer planning period in comparison to individual market transactions

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

Unlike short-term contracts, long-term contracts encourage firms to make ______ investments. Multiple choice question. transaction-non-specific transaction-specific umbrella integrated alternative

transaction-specific