MGT 499 Final Exam

What is the difference between forward integration and backward integration? A. Forward integration involves distribution and sale; backward integration involves raw material production. B. Backward integration involves distribution and sale; forward integration involves raw material production. C. Both involve adding value after a product is manufactured D. Backward integration involves stripping value at each stage; forward integration adds value at each stage of the chain.

A. Forward integration involves distribution and sale; backward integration involves raw material production.

Which of these companies is pursuing a strategy of unrelated diversification? A. GE has a division that manufactures jet engines and another division that operates financial services, including credit cards and credit financing. B. Tesla, a manufacturer of electric cars, is using the same battery technology to develop battery systems for home electricity. C. Best Buy operates both its retail stores and its Geek Squad IT support group within the same business and store organization. D. Over the years, Kroger has acquired multiple grocery store chains and currently operates Ralphs, Ruler Foods, Dillons Marketplace, and Harris Teeter.

A. GE has a division that manufactures jet engines and another division that operates financial services, including credit cards and credit financing.

In which of the following ways does horizontal integration contribute to increased profitability? A. Increases production differentiation B. Increases the cost structure C. Increases rivalry within the industry D. Reduces bargaining power over suppliers and buyers

A. Increases production differentiation

A chemical company that produces fertilizer for farms is partnering with an eco-friendly products group to brand an animal-friendly line of fertilizer that doesn't harm livestock, wild animals, or pets if they ingest it by accident. Both companies will share the costs and risks associated with creating the business. What method are they using to enter the new industry? A. Joint venture B. Internal new venture C. External new venture D. Acquisition

A. Joint venture

Which of the following situations is more typical of vertical integration than of horizontal integration? A. Managers are keen to enhance product quality. B. Combining company cultures is problematic C. Antitrust authorities have concerns about possible abuse of market power. D. Managers have increased bargaining power over buyers.

A. Managers are keen to enhance product quality.

Which of the following is an advantage of pursuing an unrelated diversification strategy over a related diversification strategy? A. The company doesn't need coordination between business units. B. The company can efficiently share costs between units. C. There is greater coordination between business units. D. There are higher bureaucratic costs.

A. The company doesn't need coordination between business units.

Strategic alliances seek to obtain the same benefits found through vertical integration. What is the difference between strategic alliances and vertical integration? A. Vertical integration seeks to either own the companies that participate in each stage of production or operate completely separately from stage to stage, while strategic alliances work together with companies throughout stages of production. B. Strategic alliances seek to either own the companies that participate in each stage of production or operate completely separately from stage to stage, while in vertical integration, companies work together throughout stages of production. C. Strategic alliances and vertical integration are the same. D. Strategic alliances coordinate between companies, while vertical integration allows companies to work together.

A. Vertical integration seeks to either own the companies that participate in each stage of production or operate completely separately from stage to stage, while strategic alliances work together with companies throughout stages of production.

Vertical integration occurs when: A. a company expands its operations either backward into an industry that produces inputs for the company's products or forward into an industry that uses, distributes, or sells the company's products. B. a company expands its operations to encompass the operations of its most intense rival. C. a company expands its operations to encompass the operations of its smallest competitor.

A. a company expands its operations either backward into an industry that produces inputs for the company's products or forward into an industry that uses, distributes, or sells the company's products.

In related diversification, a company's managers seek to establish a business unit in: A. a new industry that is related to the company's existing business units by some form of commonality between their value chain functions. B. an industry that is unrelated to its current value chain. C. a declining industry and use commonalities to create a mutually beneficial embryonic industry. D. a mature industry and reverse its potential decline through distinct competencies in their value-chain function.

A. a new industry that is related to the company's existing business units by some form of commonality between their value chain functions.

A company that manufactures brakes for cars has just released a line of all-terrain vehicles. Using the same research and findings from the development of the ATV brakes, the manufacturer is redesigning its car brakes. By sharing the research across the business units for both vehicles, the company is increasing company profitability through: A. economies of scope. B. restructuring C. product bundling. D. commonalities.

A. economies of scope.

A popular craft brewery just merged with a former competitor. The strategy behind their merger seeks to gain a larger market share as one company and take advantage of both brands' previous competitive advantages. This is an example of: A. horizontal integration. B. vertical integration C. latitudinal integration D. longitudinal integration.

A. horizontal integration.

GE's corporate headquarters has assessed the performance of its various unrelated business units. In allocating money across these units, GE uses its general organizational competencies to: A. increase their value through the internal capital market. B. increase their value through the external capital market. C. leverage commonality and shared industry expertise. D. share research and development functions.

A. increase their value through the internal capital market.

Competing beer breweries decide to merge together, achieving profitability through horizontal integration by: A. reducing rivalry within the industry. B. increasing bargaining power over suppliers and buyers. C. decreasing product differentiation. D. cross-selling.

A. reducing rivalry within the industry.

An alternative to vertical integration that enables companies to obtain differentiation and cost savings without having to deal with the problems and costs associated with vertical integration is called: A. strategic alliances B. horizontal integration C.forward integration D. merger

A. strategic alliances

Diversification is: A. the process of entering new industries, distinct from a company's core or original industry, to make new kinds of products for customers in new markets. B. the process of exiting declining industries that are distinct from a company's core or original industry, to make new kinds of product for customers in new markets. C. the process of entering existing industries similar to a company's core or original industry to remake products for customers in established markets. D. the process of exiting new industries, distinct from a company's core or original industry, to make new kinds of products for customers in new markets.

A. the process of entering new industries, distinct from a company's core or original industry, to make new kinds of products for customers in new markets.

Forward integration is a stage of vertical integration that occurs when a company: A. transforms a product from one stage to the next so that it has more worth to the next company at the next stage in the chain. B. makes effective use of parallel sourcing. C. makes effective use of parallel sourcing. D. expands operations into an industry that produces inputs for the company's products.

A. transforms a product from one stage to the next so that it has more worth to the next company at the next stage in the chain.

A metal fabrication company is considering entering the global market. It is unsure of what steps to take and is looking for a cost-effective method to enter into the market by partnering with a company that is already doing similar business in the host country. Based on the company's preferences, which mode of entry should the company choose? A. Setting up a wholly owned subsidiary B. Entering into a joint venture C. Franchising a location D. Exporting

B. Entering into a joint venture

Why might a company decide that exporting is NOT the best choice for entering the global market? A. If there is a low chance of tariffs being enacted by governments in countries with target customers B. If manufacturing abroad is costlier than manufacturing locally C. If there are lower-cost locations for manufacturing the products abroad D. If there are low transportation costs from the manufacturing location to the customer

C. If there are lower-cost locations for manufacturing the products abroad

A company has decided to expand globally to take advantage of location economies available in other countries. Which of these strategies might the company pursue? A. Develop additional products to meet the variety of needs of international customers with their diverse preferences and product requirements. B. Close all manufacturing plants, regardless of location, that are operating at less than 100% production power. C. Relocate part of its production process to another country to enjoy a competitive advantage by being closer to a large customer base in a particular country and reducing transportation requirements. D. Add manufacturing capabilities at its headquarters in its home country.

C. Relocate part of its production process to another country to enjoy a competitive advantage by being closer to a large customer base in a particular country and reducing transportation requirements.

Which of the following statements about global expansion is true? A. The goal of global expansion is to grow global product awareness. B. Global expansion of a company's products is the purpose of achieving multinational classification. C. The primary goal of manufacturing internationally is to find the least expensive labor for a company's production. D. Expanding into the global marketplace is a decision based on growing profitability with a company's current product offering.

D. Expanding into the global marketplace is a decision based on growing profitability with a company's current product offering.

If a company is experiencing increasing pressures for cost reduction for its products, which of the following courses of action should it consider? A. Pursue a franchising model for the company. B. Establish a joint venture with a foreign company. C. Sell licenses to produce the products internationally. D. Explore opportunities for exporting or create a wholly owned subsidiary within a country.

D. Explore opportunities for exporting or create a wholly owned subsidiary within a country.

Internal venturing is a more attractive strategy than acquisitions when: A. the company must make the huge investment necessary to develop the set of value-chain activities required to make and sell products in the new industry. B. entry barriers are high C. exit barriers are high D. a company's business model is based on using its technology or design skills to innovate new kinds of products and enter related markets or industries. E. it needs to move fast to establish a presence in an industry, commonly an embryonic or growth industry.

D. a company's business model is based on using its technology or design skills to innovate new kinds of products and enter related markets or industries.

Coca-Cola, a company that does business in almost every national market, can most accurately be classified as: A. a franchisee B. a wholly owned subsidiary. C. a leveraged company. D. a multinational company.

D. a multinational company.

A strategy based on diversification may fail to add value because companies: A. seek to achieve differentiation instead of low cost. B. diversify into areas in which they have some knowledge and miss out on profitable opportunities in other areas. C. make acquisitions rather than develop new technologies on their own. D. incur bureaucratic costs that exceed the value created by the strategy. E. seek to achieve a low-cost position instead of differentiation.

D. incur bureaucratic costs that exceed the value created by the strategy.

Often, internal new ventures fail because: A. they utilize their best managers for the new venture division. B. their market entry is on too large of a scale. C. the company is too focused on its customers. D. their market entry is on too small of a scale.

D. their market entry is on too small of a scale.

Strategic alliances are: A. short-term agreements between two companies to jointly develop new products. B. short-term agreements between two companies to jointly market new products that benefit all companies involved in creating the product. C. short-term partnerships between two companies D. long-term commitments between two companies to share research and development activities. E. long-term agreements between two or more companies to jointly develop new products or processes that benefit all companies that are a part of the agreement.

E. long-term agreements between two or more companies to jointly develop new products or processes that benefit all companies that are a part of the agreement.

Companies that pursue a global standardization strategy are often in the business of industrial-goods industries whose products often serve universal needs. True or False?

True

Economies of scale can be achieved by international expansion because a company can lower its average unit cost, better utilize its production facilities, and increase its bargaining power with suppliers. True or False?

True

Most manufacturing companies begin their global expansion by exporting. True or False?

True

The upside of using a localization strategy is that a company can charge a higher price because the value achieved by local customization and greater local demand allows the company to reduce costs by attaining scale economies in the local market. True or False?

True