Ch 8

Which of the following have significantly more value in their intended use than in their next-best use?

specialized assets

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

strategic alliance

Firms that pursue an unrelated diversification strategy and are unable to create additional value tend to experience which of the following?

diversification discount

Amazon's explosive success is largely due to which of the following

vertical integration diversification

Long-term contracts typically last ______.

1 year +

__ strategy involves the decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously.

Corporate

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

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

Equity Alliances

What are the three dimensions along which executives formulate corporate strategy?

The degree of vertical integration The type of diversification The geographic scope

What is licensing?

a long-term contract that enables firms to commercialize intellectual property

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

To get the benefits of vertical integration without the accompanying risks, companies can ______.

choose strategic outsourcing use taper integration

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

A(n) ______ is a situation in which the stock price of a highly diversified firms is valued as less than the sum of their individual business units.

diversification discount

Which of the following are alternatives on the make-or-buy continuum?

equity alliances joint ventures

The persons responsible for forming corporate-level strategy are the ___.

executives

Companies that transact in the open market incur ______.

external transaction costs

Long-term contracts include which of the following forms?

franchising licensing

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

grow

What are the four quadrants of the core competence-market matrix?

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

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

reduce risk

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

The Boston Consulting Group growth-share matrix locates a firm's individual SBUs in which of the following dimensions?

relative market share speed of market growth

Corporate strategy needs to be dynamic over time in order to ______.

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

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

the principal-agent problem

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 commitment

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

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

Information asymmetry

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

Taper Integration

Which of the following statements about the make-or-buy continuum is true?

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

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

Vertical Integration

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

a single market

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

forward

Specialized assets have ______.

high opportunity cost

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?

short-term contracts

What are the main types of corporate diversification?

single business diversification related diversification unrelated diversification dominant business diversification

The degree of vertical integration corresponds to ______.

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

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

Transaction

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

True

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

True

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

related diversification strategy

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

some

The lemons problem suggests that information asymmetries can cause ______.

superior goods to be replaced by inferior ones

Which of the following describes economies of scope?

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

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

Why do some firms choose alternatives to vertical integration?

to avoid the risks associated with vertical integration

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

transaction-specific

What is the opportunity cost of investmenting in specialized assets that is characterized by self-interest seeking with guile?

Opportunism

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

Physical-asset specificity

In the Boston Consulting Group growth-share matrix, each of the four categories in the matrix represents ______

a different investment strategy

Which of the following are types of vertical integration along the industry value chain?

backward forward

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

economies of scope core competencies transaction costs economies of scale

In the ______ quadrant of the core competence--market matrix, a firm combines existing core competencies with existing markets.

existing core competence--existing market

Amazon's continued focus on ______ is a key to its ongoing success.

innovation

Transaction costs include ______ costs associated with an economic exchange.

internal and external

What is the shape of the relationship between the level of diversification and performance?

inverted U

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

moderate

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

Shaniqua's Shirts uses both in-house and outside suppliers and also sells its shirts through its own retail stores and through independent retailers. Shaniqua's Shirts uses ______.

taper integration

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

True

Zipster is a local manufacturer of athletic shoes. Zipster has decided it wants to expand to global markets and to offer a larger selection of items. It plans to offer not just athletic shoes but also luggage and car accessories. Zipster is engaging in ______.

diversification

What happens when the markets along the industry value chain are too risky and alternatives too costly in time or money?

vertical market failure