Question 1

Which of the following is not a benefit of vertical integration?

Accepted Answer

A)   Facilitated investments in specialized assets
B)   Enhanced product quality
C)   Improved scheduling
D)   Lowered cost structure
E)   Strengthened differentiation advantage D

Question 2

GM typically solicits bids from global suppliers to produce a particular 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?

Accepted Answer

A)   Strategic outsourcing
B)   Competitive bidding
C)   Strategic bidding
D)   Long-term alliance
E)   Hostage taking B

Question 3

Which of the following problems is associated with the strategy of vertical integration?

Accepted Answer

A)   Decrease in cost structure
B)   Increase in industry competition 
C)   Vulnerability to unpredictable demand 
D)   Assured conflict with the antitrust authorities
E)   Lack of bureaucratic costs C

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)   parallel sourcing.
B)   cross-selling.
C)   product bundling.
D)   vertical integration.
E)   horizontal integration.

Question 6

The price that one division of a company charges another division for its products, which are the inputs the other division requires to manufacture its own products is known as:

Accepted Answer

A)   vertical disintegration.
B)   related pricing.
C)   transfer pricing.
D)   related diversification.
E)   tapered pricing.

Question 7

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

Accepted Answer

A)   Tapered integration
B)   Vertical integration
C)   Horizontal integration
D)   Franchising
E)   Diversification

Question 8

Strategic alliance is a type of long-term contract that involves one company taking over another company.

Accepted Answer

A) True 
 B)False

Question 9

Horizontal integration in an industry tends to:

Accepted Answer

A)   increase the cost structure.
B)   increase product differentiation.
C)   undermine the company's competitive advantage.
D)   increase rivalry within the industry.
E)   reduce bargaining power over suppliers and buyers.

Question 10

Strategic alliances are:

Accepted Answer

A)   short-term agreements between two companies to jointly develop new products.
B)   short-term agreements between two companies to jointly market new products that benefit all companies involved in creating the product.
C)   short-term partnerships between two companies.
D)   long-term commitments between two companies to share research and development activities.
E)   long-term agreements between two or more companies to jointly develop products that benefit all companies involved in the alliance.

Question 11

Horizontal integration allows companies to obtain bargaining power over suppliers or buyers and increase their profitability at the expense of suppliers or buyers.

Accepted Answer

A) True 
 B)False

Question 12

Oracle Corp., based in Reno, Nevada, has purchased several other companies to become the world's largest maker of database software. This strategy is known as the strategy of acquisition.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)   horizontal integration.
B)   outsourcing.
C)   strategic alliance.
D)   joint venture.
E)   vertical integration.

Question 14

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

Accepted Answer

A)   Reduced risk of coming into conflict with the FTC
B)   Better realization of economies of scale
C)   Greater control over the entire supply chain
D)   Reduced risk of holdup
E)   Reduced need for investment in core activities

Question 15

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

Accepted Answer

A)   The company will acquire one of its suppliers.
B)   The company will buy or merge with one of its rivals.
C)   The company will begin to distribute its own products.
D)   The company will change the organizational structure to make it more flat.
E)   The company will merge with another company that belongs to a different industry.

Question 16

Vertical integration is based on a company entering only those industries that:

Accepted Answer

A)   are involved in the distribution of products.
B)   are considered as potential competitors.
C)   are involved in sourcing raw materials.
D)   are not in any way related to the company's current business operation.
E)   add value to its core products.

Question 17

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, together, at a better price as one combined product. Which of the following concepts is the company utilizing to meet the customer's needs?

Accepted Answer

A)   Product bundling
B)   Cross-selling
C)   Hostage taking
D)   Strategic outsourcing
E)   Parallel sourcing

Question 18

A company pursuing a strategy of vertical integration may expand its operations:

Accepted Answer

A)   backward into an industry that produces inputs for the company's products.
B)   by making specialized investments jointly with its competitor.
C)   laterally into an industry that competes with the company's products.
D)   by merging with industry competitors.
E)   by using its capital resources to purchase another company within the industry.

Question 19

A leading software company merged with its competitor to form a new company. Which of the following is likely to be the result of this merger?

Accepted Answer

A)   Decreased cost per unit output
B)   Decreased bargaining power over suppliers and customers
C)   Increased industry rivalry
D)   Decreased profitability
E)   Decreased product differentiation

Question 20

An advantage of horizontal integration is that it can lower a company's cost structure by creating increasing economies of scale.

Accepted Answer

A) True 
 B)False

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

Which of the following is not a benefit of vertical integration?

Which of the following problems is associated with the strategy of vertical integration?

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

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

The price that one division of a company charges another division for its products, which are the inputs the other division requires to manufacture its own products is known as:

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

Strategic alliance is a type of long-term contract that involves one company taking over another company.

Horizontal integration in an industry tends to:

Strategic alliances are:

Horizontal integration allows companies to obtain bargaining power over suppliers or buyers and increase their profitability at the expense of suppliers or buyers.

Oracle Corp., based in Reno, Nevada, has purchased several other companies to become the world's largest maker of database software. This strategy is known as the strategy of acquisition.

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

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

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

Vertical integration is based on a company entering only those industries that:

A company pursuing a strategy of vertical integration may expand its operations:

A leading software company merged with its competitor to form a new company. Which of the following is likely to be the result of this merger?

An advantage of horizontal integration is that it can lower a company's cost structure by creating increasing economies of scale.