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

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

SparklingLeaves is one of the major suppliers of automobile tools to StanMotors, a leading automobile company. Many of the tools are customized to meet the specific needs of StanMotors and hence have little other value. In return, StanMotors has agreed to make SparklingLeaves its sole supplier of automobile equipment for a period of 15 years. This scenario illustrates:

Which of the following would be a deterrent to companies seeking to achieve a competitive advantage through one company making an investment in a specialized asset so it can trade with another?

Rachel, a new mom, is shopping for baby products. She notices that one of the manufacturers, Lucy's, is offering a wide range of products such as baby shampoo, baby lotion, and baby wipes packaged together at a better price as one combined product. Which of the following concepts is the company utilizing to meet customers' needs?

Which of the following would be a factor in the decision of strategic managers to vertically disintegrate to strengthen their core business model?

The final part of the strategy-formulation process is choosing:

A company that chooses forward vertical integration into downstream industries is focused on moving toward adding value to component parts, manufacturing, and raw materials.

Ownership of retail outlets may be necessary if:

When a company is successful and focused in one industry, they should always try enter into new industries because the company's existing resources and capabilities will always create value and a new set of competitive industry forces can be met with the strategies that the company has used successfully in their original industry.

Long-term agreements between two or more companies to jointly develop new products or processes that benefit all companies that are part of the agreement are known as:

Horizontal integration can lead to low cost advantages but rarely to differentiation advantages.

Which of the following is a benefit that firms should expect to gain from the use of horizontal integration?

Tina's Technologies is expanding its operations backward into an industry that produces inputs for the company's products. Tina's Technologies is utilizing horizontal integration.

John's surfboard shop has a long-term relationship with two surfboard makers. John is using:

An automobile company enters into a long-term contract with two suppliers for the same automobile tool. This is to ensure the company is protected in the event one of the suppliers adopts an uncooperative attitude. Which of the following concepts is illustrated in this scenario?

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?

When a company outsources its noncore activities to specialists, it loses its capabilities to differentiate its final products.

In a backward vertical integration into upstream industries, which of the following describes the next step in the value chain after final assembly?

In which of the following is a firm MOST likely to lose direct control over value creation activities?

GM typically solicits bids from global suppliers to produce a component and awards a 1-year contract to the supplier that submits the lowest bid. At the end of the year, a contract is once again put out for bid, and once again the lowest cost supplier is most likely to win the bid. Which of the following is GM using?