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Corporate Strategy: Vertical Integration And Diversification

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Question 1
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Corporate strategy is focused solely on determining the geographic locations in which the firm should compete.

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Question 2
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Not all firms are motivated by a need to grow.

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Question 3
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The internal and external costs associated with an economic exchange are known as interaction costs.

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Question 4
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Firms are more capable than markets at coordinating highly complex tasks, while markets are more capable of providing high-powered incentives for entrepreneurship.

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Question 5
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Managers have exactly two choices when determining the boundaries of the firm: produce goods and services in-house ("make") or purchase them externally ("buy").

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Question 6
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A firm that decides to stop purchasing components from suppliers and start producing them in-house is pursuing backward vertical integration.

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Question 7
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Sending jobs out of the country to lower costs is known as outsourcing.

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Question 8
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A conglomerate receives less than 70 percent of its revenues from any single business and features a number of strategic business units that have little to no relationship with each other.

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Question 9
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The most challenging diversification strategy is likely to be one that combines new core competencies with new and emerging markets.

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Question 10
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Firms that pursue extremely high or extremely low levels of diversification perform better than those that pursue moderate levels of diversification.

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Question 11
Multiple Choice

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of

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A
geographic diversification.
B
product diversification.
C
vertical integration.
D
horizontal integration.
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Question 12
Multiple Choice

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

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A
level of diversification.
B
geographic scope.
C
vertical integration.
D
competitive strategy.
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Question 13
Multiple Choice

Decisions relating to the range of products and services a firm will offer determine the firm's

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A
level of diversification.
B
geographic scope.
C
vertical integration.
D
absorptive capacity.
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Question 14
Multiple Choice

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?

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A
the first-line employees
B
the creditors
C
the chief executive officer
D
the middle manager
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Question 15
Multiple Choice

Anita has been named CEO of a popular sports apparel company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Anita most likely to make?

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A
whether to pursue a differentiation or cost leadership strategy
B
which customer segments to target
C
how to achieve the highest levels of customer satisfaction
D
what range of products the firm should offer
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Question 16
Multiple Choice

The managers at Camphor Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector?

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A
by having higher performance in another sector
B
by sharing their market power
C
by increasing the firm's risk in another sector
D
by motivating managers
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Question 17
Multiple Choice

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale?

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A
increasing profits
B
lowering costs
C
reducing risk
D
motivating managers
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Question 18
Multiple Choice

Which of the following motivations for business growth involves principal-agent problems?

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A
increasing profits
B
increasing market power
C
reducing risk
D
motivating managers
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Question 19
Multiple Choice

Best Burger is a major fast food chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth?

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A
employing celebrity spokespeople
B
implementing automated burger-making machinery
C
purchasing competitors
D
increasing executive salaries
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Question 20
Multiple Choice

Which of the following is an example of an external transaction cost?

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A
the cost of setting up a production unit
B
the cost of searching for a contract manufacturer
C
the cost of recruiting and retaining employees
D
the cost of maintaining plant and machinery
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