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.

By using their enormous bargaining power and efficiency in inventory logistics, Wal-Mart has been able to expand and have a competitive advantage in other discount retail store formats, such as its chain of Sam's Clubs. This is an example of leveraging a competitive advantage more broadly.

A leading software company merged with its competitor to form a new company. Which of the following is likely to be the result of this merger?

Horizontal integration may be thought of as:

The price that one division of a company charges another division for its products, which are the inputs the other division requires to manufacture its own products, is known as:

Oracle Corp., based in Reno, Nevada, has purchased several other companies to become the world's largest maker of database software. This strategy is known as the strategy of acquisition.

In 1999, two pharmaceutical companies that held an equal market share decided to pool their operations to create a new firm that was known by a different name. This is an example of a(n):

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

Investments in specialized assets only occur on the production side within an industry to build competitive advantage.

For a company concentrating on final assembly, adding retail and distribution into its value chain will require:

The horizontal integration of pharmaceutical companies helps lower costs by filling the need to achieve scale economies in research and development (R&D), sales, and marketing and combining the fixed costs of building a nationwide pharmaceutical sales force.

In the process of strategic outsourcing, which of the following would come after managers review noncore functions to assess whether independent companies that specialize in those activities can perform them more effectively and efficiently?

As one of the benefits of outsourcing, what are the advantages of focusing on the core values and activities?

Strategic alliances cannot serve as a substitute for vertical integration because they only create relatively weak, short-term partnerships that allow only one company to obtain the benefits that would have resulted from vertical integration.

Strategic outsourcing is the decision to allow one or more of a company's value-chain activities or functions to be performed by independent companies.

Which of the following is NOT an advantage of the corporate-level strategies followed by companies like McDonalds and Wal-Mart?

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

Lime's business decision to buy scooters that are not optimized for its purposes because the option to manufacture their own scooters would result in large fixed costs. Which of the following disadvantages of vertical integration does this represent?

Vertical disintegration occurs when a company:

Compare the benefits and risks associated with horizontal and vertical integration. Under what circumstances would a firm prefer one over the other?