|
level of diversification |
A large conglomerate is deciding on the range of new products and services it can offer to its customers to further expand its operations. This decision determines the firm’s A. level of diversification. B. vertical integration. C. geographic scope. D. horizontal integration. |
|
the boundaries of the firm |
The executives of BlueWind Products Inc., a large conglomerate, are making decisions on the stages of the industry value chain the firm must participate in, the range of products and services it should offer, and the global markets it should compete in. What are the executives primarily determining? A. the firm’s economies of scale B. the boundaries of the firm C. the firm’s chain of command D. the absorptive capacity of the firm |
|
increase their market power |
Firms often consolidate industries through horizontal mergers and acquisitions to A. solve principal-agent problems. B. lower their stock prices. C. increase their market power. D. motivate managers. |
|
the costs pertaining to setting up a shop floor |
Which of the following is an example of internal transaction costs? A. the costs pertaining to setting up a shop floor B. the costs associated with searching for suitable manufacturer contracts C. the costs associated with negotiating prices with a business consultancy D. the costs linked to outsourcing payroll maintenance |
|
A social entrepreneur makes conservation of the environment the primary goal of his firm |
Which of the following examples would most likely limit a firm’s growth? A. A social entrepreneur wants to combine large profits with a socially responsible approach. B. A social entrepreneur makes conservation of the environment the primary goal of his firm. C. An entrepreneur sees retraining managers to eliminate principal-agent problems as a main goal of her firm. D. An entrepreneur views joining a conglomerate as an important opportunity to reduce risks. |
|
nontrivial search costs to be borne by the firm |
A disadvantage associated with obtaining goods and services externally includes A. high administrative costs due to increased bureaucracy. B. low-powered incentives for an individual to work as an entrepreneur for the firm. C. nontrivial search costs to be borne by the firm. D. creation of economies of scope for the firm. |
|
information asymmetries |
A financial advisor has heard from a relative of NR Industries Inc.’s CEO that the company is planning to shut down its operations in Europe next year. The financial advisor realizes that this decision may cause a decline in the value of the company’s shares and decides to sell them off. A buyer, unaware of the company’s future plans, sees this as a potential opportunity and invests in the company. What does this scenario best illustrate? A. network effects B. experience-curve effects C. principal-agent problems D. information asymmetries |
|
equity alliance |
When Moon Star Products Inc. planned to start its operations in United Cadvia, an emerging nation, it realized that it will have to set up its own distribution channels. This would be a risky and an expensive strategic move. The company had an option of hiring a small supply chain management company, Gold Logistics Inc., to reach its ultimate customers. However, this would require Gold Logistics to make huge investments, which would be of no use to it if Moon Star decided to exit the market. Thus, to gain Gold Logistics’s confidence, Moon Star purchased 40 percent of the stock of Gold Logistics. What does this scenario best illustrate? A. equity alliance B. franchising C. licensing D. venture capitalism |
|
Backward vertical integration |
_______ is best described as the changes in an industry value chain that involve moving ownership of activities upstream to the originating (inputs) point of the value chain. A. Disruptive innovation B. Corporate divestiture C. Reverse engineering D. Backward vertical integration |
|
a chocolate manufacturing company setting up its own cocoa plantations |
Which of the following best illustrates backward vertical integration? A. an apparel company launching its line of premium wrist watches B. a supplier of plastic bottles launching his or her own brand of sparkling water C. a shoe brand outsourcing its production unit to manufacturers in less developed nations D. a chocolate manufacturing company setting up its own cocoa plantations |
|
forward vertical integration |
HTC started as an original equipment manufacturing firm (OEM) for brand-name mobile device companies. Later, it started offering a lineup of innovative and high-performance smartphones by acquiring One & Co., a San Francisco-based design firm. This strategic move of HTC is known as A. crowdsourcing. B. corporate divestiture. C. forward vertical integration. D. radical innovation. |
|
training employees on how to operate a customized furnace |
Which of the following best illustrates human-asset specificity? A. investing in drilling equipment to drill through any commercial metal B. training employees on how to operate a customized furnace C. using standard casting machines in industrial manufacturing D. instructing employees on how to operate a standard MRI scanner |
|
strategic outsourcing |
Mega Products Inc., a large multinational conglomerate, has hired an external consultant to process and audit its payroll. This allows the company to focus on manufacturing and marketing activities rather than developing and maintaining its own human resource management systems. Which of the following alternatives to vertical integration has Mega Products adopted? A. crowdsourcing B. forward integration C. backward integration D. strategic outsourcing |
|
benefit from economies of scale and scope |
The rationale behind related diversification is to A. limit learning-curve and experience-curve effects. B. benefit from economies of scale and scope. C. obtain only 10 percent of the revenues from the primary business activities. D. avoid sharing resources and competencies across different business lines. |
|
related-linked diversification |
Amazon expanded its single-product business by leveraging spare capacity into cloud computing and by offering its Kindle line of tablet computers. This is an example of A. unrelated diversification. B. related-linked diversification. C. taper integration. D. backward vertical integration. |
|
an automobile company that manufactures petrol cars expanding into the diesel car industry |
Which of the following is an example of related-constrained diversification? A. a consumer electronics company launching its own line of designer apparel and accessories B. an automobile company that manufactures petrol cars expanding into the diesel car industry C. a grocery store leveraging its extra shelf space by stocking kitchen appliances D. a company dealing in home appliances hiring another company to carry out its marketing strategies |
|
Siova Inc. is a luxury brand that derives 90 percent of its revenues from its apparel line and 10 percent of its revenues from its premium furniture business unit |
Which of the following best illustrates a dominant-business firm? A. Million Products Inc. is a company whose multiple strategic business units contribute equally to the total corporate revenue. B. Siova Inc. is a luxury brand that derives 90 percent of its revenues from its apparel line and 10 percent of its revenues from its premium furniture business unit. C. Sova Autos Inc. is a company whose revenues solely come from selling automobiles. D. BC Goods Inc. is a firm that derives 50 percent of its revenues from its steel unit and another 50 percent from its automobile businesses. |
|
leveraging existing core competencies to improve current market position |
North Carolina National Bank (NCNB) used its unique core competency of identifying, appraising, and integrating acquisition targets to be rebranded as Bank of America, one of the largest banks in the United States. This is an example of a firm A. leveraging existing core competencies to improve current market position. B. building new core competencies to protect new market position. C. redeploying and recombining existing core competencies to compete in markets of the future. D. building new core competencies to create and compete in markets of the future. |
|
high and low levels of diversification are generally associated with lower overall performance |
An inverted U-shaped relationship between the type of diversification and overall firm performance indicates that A. high and low levels of diversification are generally associated with lower overall performance. B. moderate levels of diversification fail to achieve additional value creation. C. firms that compete in single markets benefit the most from economies of scope. D. levels of vertical integration and overall firm performance share an inverse relationship. |
|
are unable to create additional value |
Highly diversified firms experience a diversification discount in the stock market because they A. cannot leverage financial economies. B. are unable to create additional value. C. cannot influence costs. D. are unable to overcome institutional weaknesses in emerging economies. |
Share This
Flashcard
