Question 1

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.

Accepted Answer

A) True 
 B)False

Question 2

The term bureaucratic costs refers to costs associated with the creation and maintenance of the administrative function in a company.

Accepted Answer

A) True 
 B)False

Question 3

An advantage of horizontal integration is that it can lower a company's cost structure by creating increasing economies of scale.

Accepted Answer

A) True 
 B)False

Question 4

In a strategic alliance,one company in the agreement benefits more than the other.

Accepted Answer

A) True 
 B)False

Question 5

_____ is the process of acquiring or merging with industry competitors to achieve the competitive advantages.

Accepted Answer

A) Tapered integration 
B) Vertical integration 
C) Horizontal integration 
D) Franchising 
E) Diversification

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

Vertical integration can be disadvantageous when:

Accepted Answer

A) competitors are vertically integrated. 
B) demand is stable. 
C) industry technology is changing rapidly. 
D) the company is operating in the home country. 
E) costs of company decreases.

Question 8

Consider the case of a manufacturing firm that purchases subassemblies from a supplier,creates a finished product,and then sells that product to a wholesale distributor.What advantages might this firm gain from forward integration? From backward integration? What potential pitfalls of vertical integration might the firm face?

Accepted Answer

The answer of Consider the case of a manufacturing firm...

Question 9

When a company decides to expand into new industries,it must:

Accepted Answer

A) develop "multibusiness model" that justifies its entry into different businesses. 
B) halt marketing activities in the current industry to avoid being associated with one specific industry. 
C) select a new CEO and reappoint the board of directors. 
D) create one common business model for all the industries rather than each business unit. 
E) avoid talking about ways of increasing profitability in the business model.

Question 10

Outsourcing:

Accepted Answer

A) eliminates the need for a value chain. 
B) reduces the firm's dependence on its value chain. 
C) reorders the steps in a firm's value chain. 
D) moves some value chain activities outside the firm. 
E) strengthens the firm's capabilities in each value chain function.

Question 11

Vertical integration is undertaken to support the competitive position of a company's core business.

Accepted Answer

A) True 
 B)False

Question 12

Horizontal integration in an industry tends to:

Accepted Answer

A) increase the cost structure. 
B) increase product differentiation. 
C) undermine the company's competitive advantage. 
D) increase rivalry within the industry. 
E) reduce bargaining power over suppliers and buyers.

Question 13

Antitrust authorities:

Accepted Answer

A) favor large companies. 
B) reduce industry competition. 
C) are concerned with the abuse of market power. 
D) tend to raise prices of products for consumers. 
E) enable the achievement of market power.

Question 14

Google bought Clever Sense,a mobile app company.This is an example of a(n):

Accepted Answer

A) parallel sourcing policy. 
B) strategic outsource. 
C) strategic alliance. 
D) merger. 
E) acquisition.

Question 15

Vertical integration is based on a company entering only those industries that:

Accepted Answer

A) are involved in the distribution of products. 
B) are considered as potential competitors. 
C) are involved in sourcing raw materials. 
D) are not in any way related to the company's current business operation. 
E) add value to its core products.

Question 16

Horizontal integration allows companies to obtain bargaining power over suppliers or buyers and increase their profitability at the expense of suppliers or buyers.

Accepted Answer

A) True 
 B)False

Question 17

What is the relationship between a company's corporate-level strategy and its business model?

Accepted Answer

The answer of What is the relationship between a company's...

Question 18

The final part of the strategy formulation process is:

Accepted Answer

A) choosing business-level strategies. 
B) choosing functional-level strategies. 
C) choosing corporate-level strategies. 
D) choosing functional-level goals. 
E) choosing business-level goals.

Question 19

Adam's boss tells him that their company is pursuing the strategy of horizontal integration.Which of the following is true of this scenario?

Accepted Answer

A) The company will acquire one of its suppliers. 
B) The company will buy or merge with one of its rivals. 
C) The company will begin to distribute its own products. 
D) The company will change the organizational structure to make it more flat. 
E) The company will merge with another company that belongs to a different industry.

Question 20

All of the following are benefits of horizontal integration except:

Accepted Answer

A) Reduced risk of coming into conflict with the FTC 
B) Increased product differentiation 
C) Reduced industry rivalry 
D) Increased bargaining power over suppliers 
E) Reduced cost structure

Exam 9: Corporate-Level Strategy: Horizontal Integration, Vertical Integration, and Strategic Outsourcing

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.

The term bureaucratic costs refers to costs associated with the creation and maintenance of the administrative function in a company.

An advantage of horizontal integration is that it can lower a company's cost structure by creating increasing economies of scale.

In a strategic alliance,one company in the agreement benefits more than the other.

_____ is the process of acquiring or merging with industry competitors to achieve the competitive advantages.

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.

Vertical integration can be disadvantageous when:

When a company decides to expand into new industries,it must:

Outsourcing:

Vertical integration is undertaken to support the competitive position of a company's core business.

Horizontal integration in an industry tends to:

Antitrust authorities:

Google bought Clever Sense,a mobile app company.This is an example of a(n) :

Vertical integration is based on a company entering only those industries that:

Horizontal integration allows companies to obtain bargaining power over suppliers or buyers and increase their profitability at the expense of suppliers or buyers.

What is the relationship between a company's corporate-level strategy and its business model?

The final part of the strategy formulation process is:

Adam's boss tells him that their company is pursuing the strategy of horizontal integration.Which of the following is true of this scenario?

All of the following are benefits of horizontal integration except: