Exam 7: Vertical Integration and Outsourcing

What is the main difference between a company that is vertically integrated and a company that is vertically specialized?

In the context of the primary reasons for vertical integration in companies, which of the following statements is true of coordination?

A car has to go through several different levels of manufacturing processes before it can be painted.The painting process cannot be initiated until a car is externally assembled and then inspected.This type of interdependence can be best termed as _____.

The process where a firm contracts out a business process or activity to an external supplier is known as _____.

The country of Lydania has a complex network of pipelines that transports natural gas for millions of people.These pipelines are specifically designed for the transportation of natural gas and have limited uses outside the natural gas industry because of inherent industry regulations.These pipelines exemplify a(n) _____.

What are the dangers of vertical integration?

White Flower Corp.and DLG Inc.are competitors in the crockery industry.Claude, the head of operations at White Flower, says that the company is able to undertake its in-house business processes and activities much better than DLG.This, Claude says, helps White Flower produce better quality products that DLG.In the context of vertical integration, Claude's statements refer to the concept of _____.

Coral Corp.is a company that initially used to manufacture handbags.It has now set up a store in which it sells its own products rather than supplying them to different stores.This initiation by Coral Corp.best illustrates _____.

Teal Motors Inc., an automobile company, outsources the manufacturing of most of the automobile parts to several other companies that specialize in making parts such as ignition boxes, coil wires, and grills.Teal Motors makes sure to get these parts manufactured at a much lesser rate than it would if it manufactures its own parts.In this scenario, Teal Motors Inc.is effectively avoiding a _____.

Explain the three Cs of vertical integration.

The chief executive officer (CEO) of Ecos Inc., a well-established firm in the real estate industry states that the firm has the resources to outperform its competitors.In the context of reasons for vertical integration, the CEO is referring to the firm's _____.

What are some of the advantages of outsourcing?

Green Solutions Corp.is a washing machine manufacturing company.When it initially started out, it had held contracts with a supplier who provided the company with finished washing machine parts.However, Green Solutions later started manufacturing the parts by itself and assembling its products within the company without having to seek supplier intervention.This scenario best exemplifies _____.

Nate, the managing director of Juniper Inc., believes that instead of making auto parts on its own, it should rather outsource these tasks to other companies so that the company can focus only on the critical aspects of the final product.His colleague, Salma, believes that the company would have more competitive advantage if it made its own auto parts.Which of the following statements strengthens Nate's belief?

Which of the following is a primary characteristic of a transaction-specific asset?

Sport Soles Inc., a sports footwear manufacturing company, makes athletic shoes with rubber soles.In order to maximize its value and profit, Sport Soles sets up its operations right next to rubber tree fields.This way, the company gets easy access to its main raw material.In the context of vertical integration, this scenario illustrates that Sport Soles Inc.is exercising _____.

Violet Inc.has been undertaking a lot of responsibilities as a company in order to be the best in its industry.Over time, however, these responsibilities become tough to handle and the company finds it difficult to efficiently manage the time and effort to perform its activities.In contrast, other firms in the industry that outsource some of their activities to smaller companies find it easier to generate more profit than Violet Inc.The situation faced by Violet Inc.in this example illustrates one of the important disadvantages of vertical integration that is _____.

Which of the following scenarios illustrates the concept of outsourcing?

When one firm tries to take advantage of another firm that has made a transaction-specific investment, by causing a brief delay in business because a product has no other use is known as a(n) _____.

Saturn LLC., a computer manufacturer, uses outdated technology to build specialized graphic cards for its computers.The company finds it difficult to upgrade its graphic card building technology to a newer version.However, Sun Products Inc., one of its competitors, upgrades itself to the new version with lesser difficulty.In this scenario, Saturn LLC is facing a _____.