Chapter 9: quiz
Which of the following is NOT a cause for the intervention of antitrust authorities?
An acquisition that creates too much consolidation and increases the potential for future abuse of market power.
Which of the following is a benefit that firms should expect to gain from the use of horizontal integration?
Better realization of economies of scale
Adam's boss tells him that their company is pursuing the strategy of horizontal integration. Which of the following is true of this scenario?
The company will buy or merge with one of its rivals.
Which of the following would be a deterrent to companies seeking to achieve a competitive advantage through one company making an investment in a specialized asset so it can trade with another?
The risk of holdup
Which of the following is NOT an advantage of the corporate-level strategies followed by companies like McDonalds and Wal-Mart?
Their strategies prepare them to deal with a whole new set of competitive forces and help create ways to address unanticipated threats.
Under which of the following circumstances is vertical integration considered hazardous?
When the demand for the product fluctuates frequently
The final part of the strategy-formulation process is choosing:
corporate-level strategy
Vertical disintegration occurs when a company
decides to exit industries to its core industry.
A leading software company merged with its competitor to form a new company. Which of the following is likely to be the result of this merger?
decreased cost per unit output
T/F A merger occurs when one company uses capital resources such as stock, debt, or cash to purchase another company.
f
T/F Sharing the expenses of investment in production assets or inventory, or making long-term supply or purchase guarantees are examples of vertical integration.
f
T/F The difference between transfer prices and bureaucratic costs is that transfer prices are associated with in-house cost increases and bureaucratic costs are not part of a company's cost structure.
f
T/F Transfer pricing refers to when a company is taken advantage of by another company it does business with after it has made an investment in expensive specialized assets to better meet the needs of the other company.
f
t/f A company must choose an appropriate corporate-level strategy after selecting the pricing option (lowest, average, or premium price) that will allow it to maximize profitability.
f
t/f An example of increased product differentiation, acquiring or merging with a competitor helps to eliminate excess capacity in an industry.
f
t/f Horizontal integration can lead to low cost advantages but rarely to differentiation advantages.
f
t/f In a strategic alliance, one company in the agreement benefits more than the other.
f
t/f In order to achieve the increased profitability that horizontal integration can offer, the only area integration must be successful in is reducing rivalry within the industry.
f
t/f Investments in specialized assets only occur on the production side within an industry to build competitive advantage.
f
t/f Strategic alliances cannot serve as a substitute for vertical integration because they only create relatively weak, short-term partnerships that allow only one company to obtain the benefits that would have resulted from vertical integration.
f
t/f The main difference between an acquisition and a merger is that an acquisition establishes a new entity.
f
t/f When a company outsources its noncore activities to specialists, it loses its capabilities to differentiate its final products.
f
Which of the following benefits of vertical integration provides advantages to those businesses that want to use just-in-time (JIT) inventory systems correctly?
improved scheduling
Product bundling and cross-selling are ways to establish which of the following?
increased product differentiation
Which of the following is NOT a benefit of vertical integration?
lowered cost structure
Rachel, a new mom, is shopping for baby products. She notices that one of the manufacturers, Lucy's, is offering a wide range of products such as baby shampoo, baby lotion, and baby wipes packaged together at a better price as one combined product. Which of the following concepts is the company utilizing to meet customers' needs?
product bundling
Horizontal integration may be thought of as:
staying inside the industry in which the company currently operates.
t/f One negative effect of competitive bidding is that suppliers don't want to invest in expensive, long-term specialized assets as they will be reluctant to agree upon scheduling that will increase a supplier's costs and reduce its profitability.
t
t/f Oracle Corp., based in Reno, Nevada, has purchased several other companies to become the world's largest maker of database software. This strategy is known as the strategy of acquisition.
t
t/f Product bundling involves offering customers the opportunity to purchase a range of products at a single, combined price.
t
t/f Strategic outsourcing is the decision to allow one or more of a company's value-chain activities or functions to be performed by independent companies.
t
t/f Vertical integration can be risky when demand is unpredictable because it is hard to manage the volume or flow of products along the value-added chain.
t
t/f Vertical integration can raise costs if, over time, a company's leaders continue to purchase inputs from company-owned suppliers even when independent suppliers can supply the same inputs at lower cost.
t
Ownership of retail outlets may be necessary if:
the required standards of after-sales service for complex products are to be maintained.
Lime's business decision to buy scooters that are not optimized for its purposes because the option to manufacture their own scooters would result in large fixed costs. Which of the following disadvantages of vertical integration does this represent?
Mismatches in optimal scale
