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Exam 6: Vertical Integration

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Question 51

Multiple Choice

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The ________ explanations call for compensation that focuses on individual employees, such as cash bonuses for individual performance.

A) capabilities-based
B) strategically-based
C) flexibility-based
D) opportunism-based

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Question 52

Multiple Choice

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A firm with a ________ ratio between value added and sales has brought ________ of the value-creating activities associated with its business inside its boundaries, consistent with a high level of vertical integration.

A) low; many
B) high; many
C) medium; many
D) medium; few

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Question 53

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Which committee in a U-form organization meets monthly and usually consists of the CEO and each of the heads of the functional areas included in a firm?

According to the opportunism-based explanations of vertical integration, which of the following would be the most appropriate type of compensation to support strategy implementation?

From a CEO's perspective, coordinating functional specialists to implement a vertical integration strategy rarely involves conflict resolution.

Decisions about whether or not to vertically integrate often determine whether or not a firm is operating in a single business or industry or multiple businesses or industries.

If a computer company decided to open its own call centers to provide technical support to its corporate customers because the employees in these call centers need a significant level of in-depth training that was highly specialized to the computer company's products, this would be consistent with which explanation of vertical integration?

A decision-making setting is uncertain when the future value of an exchange cannot be known when investments in that exchange are being made.

If a firm engages in vertical integration into a business activity where it does not possess any of the valuable, rare, or costly-to-imitate resources it needs to gain a competitive advantage, it may find itself at a competitive disadvantage to the extent that some firms already have competitive advantages in these business activities.

When Apple, Inc. opened retail stores to sell its computers and iPods, this was an example of

Within the flexibility-based approach to vertical integration when should firms engage in strategic alliances instead of vertical integration, and what are the advantages of alliances under these conditions?

The major substitute for vertical integration is

A(n) ________ approach to vertical integration suggests that rather than vertically integrating into a business activity whose value is highly uncertain firms should not vertically integrate and instead should form a strategic alliance to manage this exchange.

If a firm decided to maintain relationships with several different call center management companies, each of which have adopted different technological solutions to the problem of how to use call center employees to assist customers who are using very complex products, to reduce the uncertainty of whether the people staffing the phone can help the firm's customers, this would be consistent with which explanation of vertical integration?

If TerraLoc were to use a U-form organizational structure and the CEO decided to use budgets as a management control but wanted to make sure that the managers did not become too focused on the short term, the CEO should do all of the following except

TerraLoc is most likely to use the ________ organizational structure.

Outsourcing can help firms reduce costs and focus their efforts on those business functions that are central to their competitive advantage.

Which of the following is not used to determine a firm's level of vertical integration using the value added as a percentage of sales approach?

In 1937, which Nobel Prize-winning economist first articulated the question of vertical integration, which stages of the value chain should be included within a firm's boundaries and why?

A firm may be able to gain an advantage from vertically integrating when it resolves some uncertainty it faces sooner than its competition.