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

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Question 21

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A merger occurs when one company uses its capital resources, such as stock, debt, or cash, to purchase another company.

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Question 22

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To build trust io a cooperative relationship, both fmns can:

A) rely on competitive biddiog.
B) make mutual iovestrnents in specialized assets.
C) write short-term contracts that must be renewed frequently.
D) iocrease their vertical iotegration.
E) use outsourcing of noncore activities.

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Question 23

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Rachel, a new morn, 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, as one combined product.Which of the following concepts is illustrated in the scenario?

Unfortunately, horizontal integration can not be accomplished by acquisitions or mergers.

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

Strategic outsourcing is the decision to allow one or more of a company's value chain activities or functions to be performed by independent companies.

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

A strategy of vertical integration may be a risky strategy for a company to pursue when demand is:

Horizontal integration ahnost always increases rivalry in an industry.

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

Consider the case of a manufacturing finn that purchases subassemblies from a supplier, creates a finished product, and then sells that product to a wholesale distributor.What advantages might this finn gain from forward integration? From backward integration? What potential pitfalls of vertical integration might the firm face?

Vertical integration can raise costs if, over time, a company continues to purchase inputs from company-owned suppliers when independent suppliers can supply the same inputs at lower cost.

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

Horizontal integration can help lower costs when it allows a company to reduce the duplication of resources.

Under which of the following circumstances is vertical integration considered hazardous?

Strategic alliance is a type oflong-terrn contract that involves one company taking over another company.

Tina's Technologies is expanding its operations backward into an industry that produces inputs for the company's products.Tina's Technologies is utilizing horizontal integration.

Vertical integration can be disadvantageous when:

Strategic alliances and outsourcing are two alternatives to vertical integration.What are the advantages and disadvantages of each compared to vertical integration? What can managers do to eliminate or reduce the risks?

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