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

Strategic alliance is a type oflong-terrn contract that involves one company taking over another company.

Strategic alliances and outsourcing are two alternatives to vertical integration.What are the advantages and disadvantages of each compared to vertical integration? What can managers do to eliminate or reduce the risks?

Even though companies may invest in specialized assets to build competitive advantage, it is seldom necessary that suppliers do so.

Vertical integration can be disadvantageous when:

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.

Adam's boss tells him that their company is pursuing the strategy of horizontal integration.Which of the following is evident from the scenario?

Rachel, a new morn, 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, together, as one combined product.Which of the following concepts is illustrated in the scenario?

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.

A merger occurs when one company uses its capital resources, such as stock, debt, or cash, to purchase another company.

Under which of the following circumstances is vertical integration considered hazardous?

Horizontal integration ahnost always increases rivalry in an industry.

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

A strategy of vertical integration may be a risky strategy for a company to pursue when demand is:

To build trust io a cooperative relationship, both fmns can:

is the process of acquiring or merging with industry competitors to achieve the competitive advantages.

Horizontal integration can help lower costs when it allows a company to reduce the duplication of resources.

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

Unfortunately, horizontal integration can not be accomplished by acquisitions or mergers.

Vertical integration can raise costs if, over time, a company continues to purchase inputs from company-owned suppliers when independent suppliers can supply the same inputs at lower cost.

Consider the case of a manufacturing finn that purchases subassemblies from a supplier, creates a finished product, and then sells that product to a wholesale distributor.What advantages might this finn gain from forward integration? From backward integration? What potential pitfalls of vertical integration might the firm face?