CH10 Flashcards
The opening quotation concerning Bath Fitter illustrates the following benefits of vertical integration:[See p.251]
a. Technical economies from the physical integration of processes
b. Avoiding the transactions costs involved monitoring and enforcing contracts with external suppliers
c. Economies of scale
d. None of the above
b
The opening quotation from Tom Peters states that as “yesterday’s highly integrated giants” de-integrate,their vertical relationships are taking the form of: [See p.291]
a. Market contracts
b. Long-term contracts
c. Alliances and partnerships
d. All of the above
c
Corporate strategy decisions are mainly concerned with:[See p.252]
a. Establishing competitive advantage
b. The scope of the firm’s activities
c. The geographical boundaries of the firm
d. Diversification and vertical integration
b
The principal feature of the corporate scope of Tesla Inc, compred to other automobile manufacturers, is:[See p.252]
a. Its broad geographical scope
b. Its narrow product scope
c. A broad vertical scope
d. Its emphasis on technology
c
The capitalist economy comprises two forms of economic organization, the market mechanism operatedby prices and the administrative mechanism of firms. [See pp.252-253]
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
b
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:[See pp.254-256]
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
d
The main cause of downsizing, refocusing, and outsourcing during the latter part of the 20th century was:[See pp.255-256]
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)
c
When Amazon,com founded Amazon Studios to create content for its Amazon Prime video streaming service, this represented:[See p. 256]
a. Forward integration
b. Backward integration
c. Full integration
d. Outsourcing
b
Vertical integration by industrial firms during the major part of the 20th century was motivated primarily by firms’ desire for:[See p.256]
a. Reducing costs
b. Securing scare inputs
c. Reducing risk and improving coordination
d. Increasing speed
c
The main reason that the producers of wood pulp have often forward integrated into the production of paper is:[See p.258]
a. To increase value added by moving closer to the final customer
b. To exploit technical economies of co-locating pulp and paper making plants while avoiding transaction costs caused by transaction-specific investments
c. To reduce inventories and improve quality
d. To insulate the firm from fluctuations in the price of wood pulp
b
Which of the following factors has not contributed to the trend towards outsourcing in recent decades:[See pp.256, 258 ]
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
b
In order for a manufacturer of consumer goods to maximize responsiveness to changes in consumer demand for its products:[See p.261]
a. It is best to outsource the production of components and materials
b. It is best to be backward integrated into the production of components and materials
c. It depends upon the type of flexibility that is desired
d. It is best to be partially backward integrated
c
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: [See pp.264-265]
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 ofmarket contracts
d
Vertical integration by Zara, the main division and brand of the Spanish clothing firm Inditex, illustrates:
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-specificinvestments by garment manufacturers
d. The potential for vertical integration to exploit technical economies from co-locating adjacent processes.
b
