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Q:
In which type of limited corporate diversification do firms have greater than 95% of their total sales in a single product market?
A) dominant-business firms
B) single-business firms
C) related-constrained firms
D) related-linked firms
Q:
A firm has implemented a strategy of ________ when all or most of its activities fall within a single industry and geographic market.
A) limited corporate diversification
B) related diversification
C) unrelated diversification
D) related-linked diversification
Q:
When a firm simultaneously implements both a product diversification strategy and a geographic market diversification strategy it is said to be implementing a(n)
A) mixed-market diversification strategy.
B) unrelated-diversification strategy.
C) product-differentiation strategy.
D) product-market diversification strategy.
Q:
When a firm operates in multiple geographic markets simultaneously it is said to be implementing a(n)
A) international diversification strategy.
B) product-differentiation strategy.
C) geographic market diversification strategy.
D) geographic market differentiation strategy.
Q:
When a firm operates in multiple industries simultaneously, it is said to be implementing a
A) product diversification strategy.
B) product-differentiation strategy.
C) geographic market diversification strategy.
D) geographic market differentiation strategy.
Q:
A firm implements a ________ when it operates in multiple industries or markets simultaneously.
A) vertical integration strategy
B) corporate diversification strategy
C) business diversification strategy
D) product-differentiation strategy
Q:
Multipoint competition requires loose coordination between the different businesses in which a firm operates.
Q:
Shared activities, risk reduction, tax advantages, and employee compensation as bases for corporate diversification are usually relatively easy to duplicate.
Q:
Internal capital allocation is an example of less costly-to-duplicate economies of scope.
Q:
Employee compensation is an example of costly-to-duplicate economies of scope.
Q:
Exploiting market power is an example of costly-to-duplicate economies of scope.
Q:
Core competencies are an example of costly-to-duplicate economies of scope.
Q:
One substitute for diversification that exists is that instead of obtaining cost or revenue advantages from exploiting economies of scope across businesses in a diversified firm, a firm may decide to simply grow and develop each of its businesses separately.
Q:
Strategic alliances are generally viewed as a poor substitute for diversification since the economies of scope in diversification can be found in strategic alliances.
Q:
Shared activities and risk reduction are usually difficult-to-duplicate bases for corporate diversification, but tax advantages and employee compensation are usually relatively easy to duplicate.
Q:
Most of the different types of economies of scope cannot be realized by equity holders on their own.
Q:
A firm's stakeholders include all of those groups or individuals who have an interest in how a firm performs.
Q:
Diversification per se is usually not a rare firm strategy regardless of how rare the particular economies of scope associated with that diversification are.
Q:
The only two economies of scope that do not have the potential for generating positive returns for a firm's equity holders are diversification in order to maximize the size of a firm and diversification to reduce risk.
Q:
Overall, related diversification is less likely to be consistent with the interests of a firm's equity holders than is unrelated diversification.
Q:
Both shared activities and internal capital allocation are examples of economies of scope that have the potential for generating positive returns for a firm's equity holders.
Q:
Predatory pricing is a type of cross-subsidization in which a firm uses revenues from other businesses to set its prices in a particular business so that the prices are substantially more than the subsidized business's costs.
Q:
Multipoint competition exists when two or more diversified firms simultaneously compete in multiple markets, and multipoint competition can serve to facilitate a particular type of tacit collusion called mutual forbearance.
Q:
The businesses within a diversified firm always gain cost-of-capital advantages by being part of a diversified firm's portfolio.
Q:
A firm's dominant logic is a common way of thinking about strategy across different businesses.
Q:
Firms that may appear to be unrelated diversified firms, but that are, in fact, related diversified firms without any shared activities are referred to as seemingly related firms.
Q:
A firm that diversifies by exploiting its resources and capability advantages in its original business will have higher costs than firms that begin new business without these revenues and capability advantages or lower revenues than firms lacking these advantages, or both.
Q:
Core competencies are complex sets of resources and capabilities that link different businesses in a diversified firm through managerial and technical know-how, experience, and wisdom.
Q:
Over the last decade, more and more diversified firms have been abandoning efforts at managing each business's activities independently in favor of increased activity sharing.
Q:
One of the limits of activity sharing is that sharing activities may limit the ability of a particular business to meet its specific customers' needs.
Q:
Shared activities can increase the revenues in diversified firms' businesses, and failure to exploit shared activities across businesses can lead to out-of-control costs.
Q:
Shared activities that can provide the basis for operational economies of scope are quite common among related-constrained and related-linked diversified firms, as well as firms following an unrelated diversification strategy.
Q:
Shared activities can increase the expenses for a diversified firm's business.
Q:
Currently, most scholars believe that when a firm implements a corporate diversification strategy it destroys about 25% of its market value.
Q:
In order for corporate diversification to be economically valuable there must either be some valuable economy of scope among the multiple businesses in which a firm is operating or it must be less costly for managers in a firm to realize these economies of scope than for an outside equity holder on his or her own.
Q:
Economies of scope exist in a firm when the value of the products or services it sells increase as a function of the number of businesses in which the firm operates.
Q:
When less than 90 percent of a firm's revenues are generated in a single product market and when a firm's business share few, if any, common attributes, then that firm is pursuing a strategy of unrelated corporate diversification.
Q:
If the different businesses that a single firm pursues are linked on only a couple of dimensions, or if different sets of businesses are linked along very different dimensions, that corporate diversification strategy is called related-linked diversification.
Q:
If all the businesses in which a firm operates share a significant number of inputs, production technologies, distribution channels, similar customers, and so forth, this corporate diversification strategy is called related-constrained diversification.
Q:
A dominant-business firm is pursuing a related diversification strategy and has between 70 and 95 percent of firm revenues from a single business.
Q:
Firms that pursue a strategy of related corporate diversification have some type of linkages among most of the different businesses they pursue.
Q:
A firm has implemented a strategy of limited corporate diversification when all or most of its business activities fall within a single industry and geographic market.
Q:
When a firm operates in multiple geographic markets simultaneously it is said to be implementing a product diversification strategy.
Q:
When a firm operates in multiple industries simultaneously it is said to be implementing a geographic market diversification strategy.
Q:
A firm implements a corporate diversification strategy when it operates in multiple industries or markets simultaneously.
Q:
According to the capabilities-based explanations of vertical integration, which of the following would be the most appropriate type of compensation to support strategy implementation?
A) salary
B) cash bonuses for corporate performance
C) cash bonuses for individual performance
D) stock grants for individual performance
Q:
According to the opportunism-based explanations of vertical integration, which of the following would be the most appropriate type of compensation to support strategy implementation?
A) cash bonuses for corporate performance
B) cash bonuses for group performance
C) stock options for individual performance
D) stock grants for individual performance
Q:
Investments made by employees that have more value in a particular company than in alternative companies are known as
A) firm-specific investments.
B) individual-specific investments.
C) group-specific investments.
D) opportunistic investments.
Q:
Which committee in a U-form organization meets weekly and reviews the performance of the firm on a weekly basis and typically consists of a CEO and two or three functional senior managers?
A) top management team
B) executive committee
C) operations committee
D) functional committee
Q:
Which committee in a U-form organization meets monthly and usually consists of the CEO and each of the heads of the functional areas included in a firm?
A) executive committee
B) functional committee
C) operations committee
D) managerial committee
Q:
Evaluating a functional manager's performance relative to budgets can be an effective control when
A) the process used in developing budgets is open and participative.
B) the process reflects the economic best-case scenario developed by the functional manager.
C) the process reflects the economic worst-case scenario developed by the functional manager.
D) the process relies solely on quantitative criteria to evaluate the functional manager's performance.
Q:
If Brenda Thompson, Tom Mix's supervisor, wanted to use a budgeting process to help evaluate Tom's performance but wanted to ensure that using a budget did not encourage Tom to focus on short-term behaviors at the expense of long-term results, she should
A) develop the budget herself using realistic goals based on the economic reality facing Tom's function and use both quantitative and qualitative evaluations of the performance of Tom's function and then give the budget to Tom to follow.
B) work with Tom in an open and participative process to develop the budget based on the most optimistic scenario possible and use both quantitative and qualitative evaluations of the performance of Tom's function.
C) develop the budget herself based on the most pessimistic scenario possible and use both quantitative and qualitative evaluations of the performance of Tom's function and then give the budget to Tom to follow.
D) work with Tom in an open and participative process to develop the budget based on the economic reality facing Tom's function and use both quantitative and qualitative evaluations of the performance of Tom's function.
Q:
From a CEO's perspective, coordinating functional specialists to implement a vertical integration strategy almost always involves
A) conflict resolution.
B) competitive positioning.
C) product differentiation.
D) corporate expansion.
Q:
Which organizational structure is used to implement a vertical integration strategy?
A) matrix
B) functional
C) multidivisional
D) product-divisional
Q:
The major substitute for vertical integration is
A) vertical disintegration.
B) strategic alliances.
C) a product-differentiation strategy.
D) a low-cost strategy.
Q:
Which of the following statements regarding direct duplication and substitutes for vertical integration is accurate?
A) A firm's valuable and rare vertical integration choices may be subject to direct duplication and substitutes.
B) A firm's valuable and rare vertical integration choices are subject to neither direct duplication nor substitutes.
C) A firm's valuable and rare vertical integration choices may be subject to direct duplication but not to substitutes.
D) A firm's valuable and rare vertical integration choices may be subject to substitutes but not to direct duplication.
Q:
A firm is likely to be among the first in its industry to vertically disintegrate an exchange when
A) the firm concludes that the level of specific investment required to manage an economic exchange is high.
B) the firm believes that the exchange is costly to imitate.
C) the level of uncertainty about the value of an exchange has increased.
D) the firm believes that the exchange is rare.
Q:
If a computer company decided to open its own call centers to provide technical support to its corporate customers because the employees in these call centers need a significant level of in-depth training that was highly specialized to the computer company's products, this would be consistent with which explanation of vertical integration?
A) opportunism-based
B) flexibility-based
C) firm capabilities-based
D) alliance-based
Q:
Some observers predict that by ________ an additional 3.3 million jobs in the United States will be outsourced, many to operations overseas.
A) 2014
B) 2015
C) 2016
D) 2017
Q:
If a firm decided to maintain relationships with several different call center management companies, each of which have adopted different technological solutions to the problem of how to use call center employees to assist customers who are using very complex products, to reduce the uncertainty of whether the people staffing the phone can help the firm's customers, this would be consistent with which explanation of vertical integration?
A) opportunism-based
B) flexibility-based
C) firm capabilities-based
D) alliance-based
Q:
Which of the explanations of vertical integration is the oldest and has received the greatest empirical support?
A) opportunism-based
B) flexibility-based
C) firm capabilities-based
D) alliance-based
Q:
A(n) ________ approach to vertical integration suggests that rather than vertically integrating into a business activity whose value is highly uncertain firms should not vertically integrate and instead should form a strategic alliance to manage this exchange.
A) alliance-based
B) flexibility-based
C) firm capabilities-based
D) opportunism-based
Q:
A decision-making setting is ________ when the future of an exchange cannot be known when investments in that exchange are being made.
A) uncertain
B) opportunistic
C) flexible
D) dynamic
Q:
Research suggests that, in general, vertically integrating is ________ than not vertically integrating.
A) significantly more flexible
B) somewhat more flexible
C) comparatively flexible
D) less flexible
Q:
________ refers to how costly it is for a firm to alter its strategic and organizational decisions.
A) Flexibility
B) Dynamic capability
C) Opportunism
D) Uncertainty
Q:
To the extent that other firms may have competitive advantages in business activities that a firm is considering to enter through vertical integration, vertically integrating into these activities could put the firm at a
A) competitive advantage.
B) temporary dynamic disadvantage.
C) sustainable competitive advantage.
D) competitive disadvantage.
Q:
The essence of the ________ to vertical integration is that if a firm possesses valuable, rare, and costly-to-imitate resources in a business activity, it should vertically integrate into that activity otherwise it should not vertically integrate into that activity.
A) flexibility-based explanation
B) opportunism-based explanation
C) firm capability explanation
D) opportunity-based explanation
Q:
According to ________ of when vertical integration creates value, vertical integration is valuable when it reduces threats from a firm's suppliers or buyers due to any transaction-specific investments a firm has made.
A) firm capability explanations
B) opportunity-based explanations
C) flexibility-based explanations
D) opportunism-based explanations
Q:
A(n) ________ is any investment in an exchange that has significantly more value in the current exchange than it does in alternative exchanges.
A) opportunity-specific investment
B) transaction-specific investment
C) competition-specific investment
D) opportunistic investment
Q:
________ exists when a firm is unfairly exploited in an exchange.
A) Competitive advantage
B) Business level strategy
C) Opportunism
D) Corporate level strategy
Q:
In 1937, which Nobel Prize-winning economist first articulated the question of vertical integration, i.e., which stages of the value chain should be included within a firm's boundaries and why?
A) Ronald Coase
B) Adam Smith
C) David Ricardo
D) Milton Freidman
Q:
A firm with a ________ ratio between value added and sales has brought ________ of the value-creating activities associated with its business inside its boundaries, consistent with a high level of vertical integration.
A) low; many
B) high; many
C) medium; many
D) medium; few
Q:
Which of the following is not used to determine a firm's level of vertical integration using the value added as a percentage of sales approach?
A) value added
B) net income
C) sales
D) gross margin
Q:
A firm's ________ measures the percentage of a firm's sales that is generated by activities done within the boundaries of a firm.
A) value added as a percentage of sales
B) simple product diversification
C) competitive advantage
D) competitive dynamic
Q:
If Dell computers were to open its own factory to manufacture the LCD televisions it sells at its online store, this would be an example of
A) forward vertical integration.
B) product differentiation.
C) forward horizontal integration.
D) backward vertical integration.
Q:
When Apple, Inc. opened retail stores to sell its computers and iPods, this was an example of
A) forward vertical integration.
B) backward vertical integration.
C) forward horizontal integration.
D) backward horizontal integration.
Q:
The number of steps in a firm's value chain that it accomplishes within its boundaries describes the firm's level of
A) product differentiation.
B) diversification.
C) vertical integration.
D) competitive dynamics.
Q:
Vertical integration is a type of
A) business strategy.
B) generic strategy.
C) differentiation strategy.
D) corporate strategy.
Q:
Capability explanations of vertical integration acknowledge the importance of firm-specific investments in creating value for a firm.
Q:
Numerous conflicts can arise among functional managers in a vertically integrated U-form organization.