Exam 14: Vertical Integration and the Scope of the Firm

Corporate strategy is concerned with the choice of which businesses a firm competes in, whereas business strategy is concerned with how a firm competes in a specific industry

Why does FedEx purchase its trucks externally, and not operate a truck manufacturing business?

Vertical integration may afford flexibility in responding to uncertain demand when:

The decision to opt for vertical integration or not depends entirely on the specific circumstances that a firm finds itself in.

The primary factor determining the degree of vertical integration in a firm is:

Backward vertical integration and forward vertical integration can be respectively defined as a situation where:

Another reason why vertical integration of steel producers and shipbuilders is highly unlikely is

What seems to be the key explanation for vertical integration of two activities?

A virtual corporation runs the risk that its outsourcing contractors renege on the arrangement, and take over the role of the virtual corporation as well, including all the profits.

The traditional justification of vertical integration emphasised the costs savings from technical economies.

Transaction costs are the costs incurred by the parties involved in a market mechanism situation, such as search costs, costs of negotiation of contracts, enforcement costs of arbitration or litigation, and the costs of monitoring the fulfillment of parties' obligations

A shared service organization is an internal entity that:

Vertical integration can be used as a strategy for refocusing on core activities

What trends exist in regard to market vs. vertical integration?

One example of the factors to consider when deciding whether to opt for vertical integration is:

Vertical integration compounds risk, because all the integrated stages of the value chain are affected simultaneously.

Long-term contracts, agency agreements, joint ventures, supplier-customer partnerships, and franchising are examples of:

Does vertical integration always incur costs, if so, which?

A major risk with pure spot transactions is:

In the relationship between steel smelters and steel strip producers, which element dictates the nature of the relationship?