Question 1

To make a choice between vertical integration or external sourcing, which statement is true?

Accepted Answer

A) It depends on the specific factors prevailing 
B) Vertical integration is preferable in a technology-intensive industry 
C) Market sourcing is preferable when the industry is very fragmented 
D) It is simply a matter of managerial preference 
A) It depends on the specific factors prevailing 
B) Vertical integration is preferable in a technology-intensive industry 
C) Market sourcing is preferable when the industry is very fragmented 
D) It is simply a matter of managerial preference

Question 2

McDonalds, Century 21 Real Estate, Hilton Hotels, and 7-Eleven stores are illustrations of:

Accepted Answer

A) Entertainment-based firms 
B) Franchises 
C) Large chains of stores with centralized authority 
D) Chains of stores that are basically managed around financial results 
A) Entertainment-based firms 
B) Franchises 
C) Large chains of stores with centralized authority 
D) Chains of stores that are basically managed around financial results

Question 3

What is the difference between a firm's geographical scope and its vertical scope?

Accepted Answer

A) The first describes the regions of the world where the firm is present and the second the stages of the industry value chain which the firm performs itself 
B) The first describes the number of countries and the second the number of horizontal businesses where the firm is present 
C) There is no difference 
D) This question does not make sense 
A) The first describes the regions of the world where the firm is present and the second the stages of the industry value chain which the firm performs itself 
B) The first describes the number of countries and the second the number of horizontal businesses where the firm is present 
C) There is no difference 
D) This question does not make sense

Question 4

In the case of steel smelters and steel strip producers:

Accepted Answer

A) Each steel strip producer is tied to its adjacent steel producer 
B) The relationship can be called "bilateral monopoly" 
C) There is no possibility of a competitive market between them 
D) All of the above 
A) Each steel strip producer is tied to its adjacent steel producer 
B) The relationship can be called "bilateral monopoly" 
C) There is no possibility of a competitive market between them 
D) All of the above

Question 5

The market mechanism and the administrative mechanism are two forms of economic organization comprising the "market economy"

Accepted Answer

A) True 
 B)False

Question 6

The drop in administrative costs relative to transaction costs is explained by:

Accepted Answer

A) Dominant firms' ability to push down wages. 
B) A relentless search for lowering operational costs 
C) The emergence of globalisation 
D) An increase in the efficiency of firms, induced by improvements in technology and management techniques 
A) Dominant firms' ability to push down wages. 
B) A relentless search for lowering operational costs 
C) The emergence of globalisation 
D) An increase in the efficiency of firms, induced by improvements in technology and management techniques

Question 7

Which of these has been the trend in the last thirty years?

Accepted Answer

A) An increase in labour costs 
B) A faster moving and more unpredictable market environment 
C) Downsizing and refocusing 
D) Answers b and c 
A) An increase in labour costs 
B) A faster moving and more unpredictable market environment 
C) Downsizing and refocusing 
D) Answers b and c

Question 8

In terms of the two main forms of economic organization, the firm can be understood as:

Accepted Answer

A) An organization that sells products and services to its environment as its "raison d'etre" 
B) An organization based around financial resources and physical resources 
C) An organization comprising individuals bound by employment contracts to a central contracting authority 
D) An organization with employees obeying managers 
A) An organization that sells products and services to its environment as its "raison d'etre" 
B) An organization based around financial resources and physical resources 
C) An organization comprising individuals bound by employment contracts to a central contracting authority 
D) An organization with employees obeying managers

Question 9

Relational contracts:

Accepted Answer

A) Tend to be less voluminous and legalistic 
B) Rely on mutual trust between the parties 
C) Both a and b 
D) Only work in Japanese business culture 
A) Tend to be less voluminous and legalistic 
B) Rely on mutual trust between the parties 
C) Both a and b 
D) Only work in Japanese business culture

Question 10

A decision to opt for vertical integration or external sourcing:

Accepted Answer

A) Can easily be reversed, so should not take up too much managerial time 
B) Can be made easier by simply opting for both 
C) Should be considered rationally by senior managers, both from a long-term financial and a strategic perspective 
D) Should be trusted to external consultants who understand the theory better 
A) Can easily be reversed, so should not take up too much managerial time 
B) Can be made easier by simply opting for both 
C) Should be considered rationally by senior managers, both from a long-term financial and a strategic perspective 
D) Should be trusted to external consultants who understand the theory better

Question 11

High powered-incentives and low-powered incentives respectively generally apply to:

Accepted Answer

A) Externally and internally sourced inputs 
B) Internally and externally sourced inputs 
C) Market and alliance sourced inputs 
D) Joint venture and alliance sourced inputs 
A) Externally and internally sourced inputs 
B) Internally and externally sourced inputs 
C) Market and alliance sourced inputs 
D) Joint venture and alliance sourced inputs

Question 12

One of the factors explaining the emergence of large firms during the 19th and the early 20th centuries, is:

Accepted Answer

A) The evolution of customers' tastes over time 
B) The development of management techniques 
C) The improvement in telecommunications 
D) The decrease in administrative costs of the firm relative to the transaction costs 
A) The evolution of customers' tastes over time 
B) The development of management techniques 
C) The improvement in telecommunications 
D) The decrease in administrative costs of the firm relative to the transaction costs

Question 13

In a vertically integrated firm, if the relative importance of administrative and transaction costs shifts from one to the other, what could the firm do?

Accepted Answer

This means that a vertically integrated

Question 14

Building a large vertical scope of activities was a popular strategy from?

Accepted Answer

A) The late 19th to late 20th century 
B) 1912 to the present day 
C) The 1920's to the 1960's 
D) Japan 
A) The late 19th to late 20th century 
B) 1912 to the present day 
C) The 1920's to the 1960's 
D) Japan

Question 15

The balance of opinion as to whether firms should conduct activities themselves or buy them in:

Accepted Answer

A) Was settled in the 19th century 
B) Has changed over time 
C) Was decided once and for all by the emergence of downsizing in the 1990's 
D) Is still to be settled by academics 
A) Was settled in the 19th century 
B) Has changed over time 
C) Was decided once and for all by the emergence of downsizing in the 1990's 
D) Is still to be settled by academics

Question 16

Vertical integration provides:

Accepted Answer

A) Superior coordination and security 
B) A larger margin 
C) Increased power over rivals in the same industry 
D) None of the above as necessity, only potentially, depends on the circumstances. 
A) Superior coordination and security 
B) A larger margin 
C) Increased power over rivals in the same industry 
D) None of the above as necessity, only potentially, depends on the circumstances.

Question 17

Why is market demand uncertainty a factor to consider when deciding whether to opt for vertical integration?

Accepted Answer

A) The greater the unpredictability of demand, the greater the need to make suppliers suffer the consequences rather than the firm 
B) The greater the unpredictability of demand, the greater the consequences of compounded risk through vertical integration 
C) The more turbulent the demand, the greater the control advantage of vertical integration 
D) The more uncertain the market demand, the greater the bargaining power of the firm in the external market 
A) The greater the unpredictability of demand, the greater the need to make suppliers suffer the consequences rather than the firm 
B) The greater the unpredictability of demand, the greater the consequences of compounded risk through vertical integration 
C) The more turbulent the demand, the greater the control advantage of vertical integration 
D) The more uncertain the market demand, the greater the bargaining power of the firm in the external market

Question 18

Vertical integration is a good strategy for combating the risks of a volatile economic environment

Accepted Answer

A) True 
 B)False

Question 19

Which characteristic of transaction-specific investments explains the necessity for vertical integration?

Accepted Answer

A) The lack of a competitive market between them 
B) The fact that each of the two producers has the opportunity to "hold up" the other 
C) Low transaction costs in that relationship 
D) The fact that a and b together form an untenable situation for separate owners. 
A) The lack of a competitive market between them 
B) The fact that each of the two producers has the opportunity to "hold up" the other 
C) Low transaction costs in that relationship 
D) The fact that a and b together form an untenable situation for separate owners.

Question 20

Managing vertically related businesses that are strategically very different is not a problem, but a challenge.

Accepted Answer

A) True 
 B)False

To make a choice between vertical integration or external sourcing, which statement is true?

McDonalds, Century 21 Real Estate, Hilton Hotels, and 7-Eleven stores are illustrations of:

What is the difference between a firm's geographical scope and its vertical scope?

In the case of steel smelters and steel strip producers:

The market mechanism and the administrative mechanism are two forms of economic organization comprising the "market economy"

The drop in administrative costs relative to transaction costs is explained by:

Which of these has been the trend in the last thirty years?

In terms of the two main forms of economic organization, the firm can be understood as:

Relational contracts:

A decision to opt for vertical integration or external sourcing:

High powered-incentives and low-powered incentives respectively generally apply to:

One of the factors explaining the emergence of large firms during the 19th and the early 20th centuries, is:

In a vertically integrated firm, if the relative importance of administrative and transaction costs shifts from one to the other, what could the firm do?

Building a large vertical scope of activities was a popular strategy from?

The balance of opinion as to whether firms should conduct activities themselves or buy them in:

Vertical integration provides:

Why is market demand uncertainty a factor to consider when deciding whether to opt for vertical integration?

Vertical integration is a good strategy for combating the risks of a volatile economic environment

Which characteristic of transaction-specific investments explains the necessity for vertical integration?

Managing vertically related businesses that are strategically very different is not a problem, but a challenge.

The Concept of Strategy

Goals, Values and Performance

Industry Analysis: the Fundamentals

Further Topics in Industry and Competitive Analysis

Analyzing Resources and Capabilities

Developing Resources and Capabilities

Organization Structure and Management Systems: the Fundamentals of Strategy Implementation

The Nature and Sources of Competitive Advantage

Cost Advantage

Differentiation Advantage

Industry Evolution and Strategic Change

Technology-Based Industries and the Management of Innovation

Competitive Advantage in Mature Industries

Global Strategies and the Multinational Corporation

Diversification Strategy

Implementing Corporate Strategy: Management of the Multibusiness Firm

Current Trends in Strategic Management

Filters

Exam 14: Vertical Integration and the Scope of the Firm

To make a choice between vertical integration or external sourcing, which statement is true?

McDonalds, Century 21 Real Estate, Hilton Hotels, and 7-Eleven stores are illustrations of:

What is the difference between a firm's geographical scope and its vertical scope?

In the case of steel smelters and steel strip producers:

The market mechanism and the administrative mechanism are two forms of economic organization comprising the "market economy"

The drop in administrative costs relative to transaction costs is explained by:

Which of these has been the trend in the last thirty years?

In terms of the two main forms of economic organization, the firm can be understood as:

Relational contracts:

A decision to opt for vertical integration or external sourcing:

High powered-incentives and low-powered incentives respectively generally apply to:

One of the factors explaining the emergence of large firms during the 19th and the early 20th centuries, is:

In a vertically integrated firm, if the relative importance of administrative and transaction costs shifts from one to the other, what could the firm do?

Building a large vertical scope of activities was a popular strategy from?

The balance of opinion as to whether firms should conduct activities themselves or buy them in:

Vertical integration provides:

Why is market demand uncertainty a factor to consider when deciding whether to opt for vertical integration?

Vertical integration is a good strategy for combating the risks of a volatile economic environment

Which characteristic of transaction-specific investments explains the necessity for vertical integration?

Managing vertically related businesses that are strategically very different is not a problem, but a challenge.

The Concept of Strategy

Goals, Values and Performance

Industry Analysis: the Fundamentals

Further Topics in Industry and Competitive Analysis

Analyzing Resources and Capabilities

Developing Resources and Capabilities

Organization Structure and Management Systems: the Fundamentals of Strategy Implementation

The Nature and Sources of Competitive Advantage

Cost Advantage

Differentiation Advantage

Industry Evolution and Strategic Change

Technology-Based Industries and the Management of Innovation

Competitive Advantage in Mature Industries

Global Strategies and the Multinational Corporation

Diversification Strategy

Implementing Corporate Strategy: Management of the Multibusiness Firm

Current Trends in Strategic Management

Filters