Question 1

The principal feature of the corporate scope of Tesla Inc,compred to other automobile manufacturers,is:

Accepted Answer

A) Its broad geographical scope 
B) Its narrow product scope 
C) A broad vertical scope 
D) Its emphasis on technology

Question 2

Which of the following factors is not conducive to vertical integration between two adjacent stages of production?

Accepted Answer

A) Similarity of the optimum scale of production between the two stages 
B) Few companies at each of the two stages 
C) The need for transaction-specific investments by the firms involved 
D) Distinctly different organizational capabilities are required at each stage

Question 3

In fashion clothing,one reason why mass-market distributors such as H&M,Forever 21,and Gap outsource their production is to reduce new product cycle time (the time between the initial design of a product and its delivery to a retail store).

Accepted Answer

A) True 
 B)False

Question 4

Vertical integration by Zara,the main division and brand of the Spanish clothing firm Inditex,illustrates:

Accepted Answer

A) The potential of vertical integration to offer flexibility in responding to seasonal fluctuations in demand 
B) The potential for vertical integration to offer flexibility in responding to rapid changes in customer product preferences 
C) The potential for vertical integration to overcome problems arising from the need for transaction-specific investments by garment manufacturers 
D) The potential for vertical integration to exploit technical economies from co-locating adjacent processes.

Question 5

Franchising offers a means of reconciling the coordination and control benefits of vertical integration with the entrepreneurial flexibility and high-powered incentives of market contracts.

Accepted Answer

A) True 
 B)False

Question 6

Economies of scope and transaction costs are important concepts when analyzing the vertical,geograpjical,amd product scope of the firm.

Accepted Answer

A) True 
 B)False

Question 7

Vertical integration allows a firm to extend its monopoly position from one stage of an industry's value chain to adjacent stages,this allows the firm to increase the amount of monopoly profit it can extract.

Accepted Answer

A) True 
 B)False

Question 8

Firms exist in situations where the administrative costs of coordinating economic activity are less than the transactions costs of organizing such activity across markets.

Accepted Answer

A) True 
 B)False

Question 9

Jewelry companies typically do not own gold and silver mines because the markets for gold and silver are highly competitive and impose few transaction costs on jewelry makers.

Accepted Answer

A) True 
 B)False

Question 10

The main cause of downsizing,refocusing,and outsourcing during the latter part of the 20th century was:

Accepted Answer

A) Developments in IT-especially the advent of the internet 
B) A more turbulent business environment 
C) Both (a)and (b) 
D) Neither (a)nor (b)

Question 11

Alfred Chandler described the administrative mechanism of ﬁrms as the "invisible hand" of economic coordination.

Accepted Answer

A) True 
 B)False

Question 12

The growth in the scope of business enterprises for most of the 19th and 20th centuries can be attributed to a drop in administrative costs of firms relative to the transaction costs of market.This resulted from:

Accepted Answer

A) The monopolistic power of large firms to raise prices and push down wages 
B) Globalization 
C) The growing transaction costs of markets as a result of taxes,regulation,and litigation 
D) Innovation in information and communications technology and in management

Question 13

The opening quotation from Tom Peters states that as "yesterday's highly integrated giants" de-integrate,their vertical relationships are taking the form of:

Accepted Answer

A) Market contracts 
B) Long-term contracts 
C) Alliances and partnerships 
D) All of the above.

Question 14

Vendor partnerships based on relational contacts-such as the relationships between vehicle manufacturers and their component suppliers-are superior to either pure market contracts or vertical integration because:

Accepted Answer

A) They give manufacturers immense bargaining power over their suppliers 
B) They offer similar benefits of high-powered incentives and flexibility that market contracts 
C) They offer similar coordination benefits as vertical integration 
D) They combine the coordination benefits of vertical integration with the incentive and flexibility benefits of market contracts.

Question 15

The capitalist economy comprises two forms of economic organization,the market mechanism operated by prices and the administrative mechanism of firms.

Accepted Answer

A) The market mechanism is referred to as the "visible hand" while the administrative mechanism of firms is referred to as the "invisible hand" 
B) The market mechanism is referred to as the "invisible hand" while the administrative mechanism of firms is referred to as the "visible hand" 
C) The simultaneous operation of both "hands" means that the capitalist system is often referred to as an "ambidextrous organization" 
D) The notion of the capitalist economy as governed by market processes is a myth.In reality the global capitalist economy is controlled by large corporations.

Question 16

Vertical integration by industrial firms during the major part of the 20th century was motivated primarily by firms' desire for:

Accepted Answer

A) Reducing costs 
B) Securing scare inputs 
C) Reducing risk and improving coordination 
D) Increasing speed

Question 17

Managing vertically-related businesses that are strategically very different is not a problem if companies adopt an appropriate organizational structure.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following factors has not contributed to the trend towards outsourcing in recent decades:

Accepted Answer

A) Increasing emphasis on cost efficiency 
B) Increasing transaction costs 
C) Increasing turbulence of the business environment 
D) Increasing emphases on the need for competitive advantage based upon superior capabilities

Question 19

Corporate strategy is concerned with decisions over product scope,geographical scope,and vertical scope.

Accepted Answer

A) True 
 B)False

Question 20

When a winery opens a tasting room through which it sells its wine to visitors,this represents:

Accepted Answer

A) Backward integration 
B) Forward integration 
C) A marketing initiative 
D) Diversification

Exam 10: Vertical Integration and the Scope of the Firm

The principal feature of the corporate scope of Tesla Inc,compred to other automobile manufacturers,is:

Which of the following factors is not conducive to vertical integration between two adjacent stages of production?

In fashion clothing,one reason why mass-market distributors such as H&M,Forever 21,and Gap outsource their production is to reduce new product cycle time (the time between the initial design of a product and its delivery to a retail store).

Vertical integration by Zara,the main division and brand of the Spanish clothing firm Inditex,illustrates:

Franchising offers a means of reconciling the coordination and control benefits of vertical integration with the entrepreneurial flexibility and high-powered incentives of market contracts.

Economies of scope and transaction costs are important concepts when analyzing the vertical,geograpjical,amd product scope of the firm.

Vertical integration allows a firm to extend its monopoly position from one stage of an industry's value chain to adjacent stages,this allows the firm to increase the amount of monopoly profit it can extract.

Firms exist in situations where the administrative costs of coordinating economic activity are less than the transactions costs of organizing such activity across markets.

Jewelry companies typically do not own gold and silver mines because the markets for gold and silver are highly competitive and impose few transaction costs on jewelry makers.

The main cause of downsizing,refocusing,and outsourcing during the latter part of the 20^th century was:

Alfred Chandler described the administrative mechanism of ﬁrms as the "invisible hand" of economic coordination.

The growth in the scope of business enterprises for most of the 19th and 20th centuries can be attributed to a drop in administrative costs of firms relative to the transaction costs of market.This resulted from:

The opening quotation from Tom Peters states that as "yesterday's highly integrated giants" de-integrate,their vertical relationships are taking the form of:

Vendor partnerships based on relational contacts-such as the relationships between vehicle manufacturers and their component suppliers-are superior to either pure market contracts or vertical integration because:

The capitalist economy comprises two forms of economic organization,the market mechanism operated by prices and the administrative mechanism of firms.

Vertical integration by industrial firms during the major part of the 20^th century was motivated primarily by firms' desire for:

Managing vertically-related businesses that are strategically very different is not a problem if companies adopt an appropriate organizational structure.

Which of the following factors has not contributed to the trend towards outsourcing in recent decades:

Corporate strategy is concerned with decisions over product scope,geographical scope,and vertical scope.

When a winery opens a tasting room through which it sells its wine to visitors,this represents: