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Question
Discuss the flexibility-based explanation of vertical integration. In discussing this explanation be sure to define flexibility, the role of uncertainty in this explanation, and identify when, under this explanation, firms should engage in vertical integration.
Answer
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Related questions
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The ________ consists of broad trends in the context in which a firm operates that can have an impact on a firm's strategic choices.
A) micro-environment
B) general environment
C) task environment
D) internal environment
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All divestments are caused by industry decline.
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Firms pursuing a harvest strategy in a declining industry do not expect to remain in the industry over the long term.
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A fragmented industry is an industry that has experienced an absolute decline in unit sales over a sustained period of time.
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Product innovation is an effort to refine and improve a firm's current processes.
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If the owner of a jewelry store who normally purchased diamonds from a diamond brokerage firm were to open its own diamond brokerage firm, this would be an example of forward vertical integration.
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The threat of buyers is greater if the products or services that are being sold to buyers are standard and not differentiated than if the products sold to buyers are highly differentiated.
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A firm's supplier poses a greater threat if the supplier's industry has a large number of firms, none of which dominate the supplying industry, than if the supplier's industry is dominated by a small number of firms.
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________ measures of competitive advantage compare a firm's level of return to its cost of capital instead of to the average level of return in the industry.
A) Economic
B) Accounting
C) Strategic
D) Sustainable
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A competitive advantage that lasts a very short period of time is known as a ________ competitive advantage.
A) temporary
B) sustained
C) transient
D) perpetual
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The difference between the perceived benefits gained by a customer who purchases a firm's products or services and the full economic costs of these products or services is known as
A) accounting value.
B) comparative value.
C) economic value.
D) sustainable value.
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When a firm is able to create more economic value than rival firms it is said to have a(n)
A) comparative advantage.
B) competitive advantage.
C) strategic choice.
D) economic advantage.
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________ occurs when a firm adopts organizational policies and practices that are consistent with its strategy.
A) Strategy formulation
B) Organizational change
C) Strategy implementation
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Firms with strategies that are unlikely to be a source of competitive advantage will rarely provide the same career opportunities as firms with strategies that do generate such advantages.
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The cost of equity is equal to the interest a firm must pay its debt holders in order to induce those debt holders to lend money to the firm.
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Identify the conditions under which a strategic alliance can be rare and discuss the role that complementary resources can play in the rarity of strategic alliances.
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eBay, the online auction company, has an impressive portfolio of cooperative agreements. This portfolio includes an agreement with the U.S. Postal Service to facilitate the shipping of goods purchased through eBay auctions, an agreement to allow MBNA to use eBay's name on a credit card, and an agreement in an online auction company in Korea that is supplemented with an investment by eBay in the Korean partner. In addition, at one time eBay had formed an independent firm, called eBay Australia and New Zealand, with an Australian company known as ecorp.eBay's agreement with ________ is the most likely to be susceptible to holdup.A) the Australian partnerB) the Korean partnerC) MBNAD) the U.S. Postal Service
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________ collusion exists when firms coordinate their production and pricing decisions not by directly communicating with each other but by exchanging signals with other firms about their intent to cooperate.
A) Explicit
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When one firm makes more transaction-specific investments in a strategic alliance than partner firms make, that firm may be subject to a form of cheating called ________ that occurs when a firm that has not made significant transaction-specific investments demands returns from an alliance that are higher than what the partners agreed to when they created the alliance.
A) adverse selection
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Strategic alliances are particularly valuable in facilitating market entry and exit when the value of market entry or exit is
A) high.
B) low.
C) moderate.
D) uncertain.
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A firm's ability to learn is known as its
A) competitive position.
B) competitive advantage.
C) distinctive competence.
D) absorptive capacity.
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Strategic alliances can create economic value through helping firms improve their current operations by
A) facilitating the development of technology standards.
B) facilitating tacit collusion.
C) exploiting economies of scale.
D) managing uncertainty.
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Sometimes the value of cheating in a joint venture is sufficiently large that a firm cheats even though doing so hurts the joint venture and forecloses future opportunities.
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In general, contracts are sufficient to resolve all the problems associated with cheating in an alliance.
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The primary purpose of organizing a strategic alliance is to enable partners in the alliance to gain all the benefits associated with cooperation while minimizing the probability that cooperating firms will cheat on their cooperative agreements.
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Capabilities theory suggests that an alliance will be preferred over going it alone when an exchange partner possesses valuable, rare, and costly-to-imitate resources and capabilities.
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In general, firms will prefer to go it alone rather than enter into a strategic alliance when the level of transaction-specific investment required to complete an exchange is low.
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Research on international joint ventures suggests that the existence of transaction-specific investments in their relationships makes these agreements relatively immune to holdup problems.
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In an alliance a holdup occurs when a firm that has not made significant transaction-specific investments demands returns from an alliance that are higher than what the partners agreed to when they created the alliance.