Chapter 6

Question 1

Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare and only two brick plants in the U.S. make this type of brick. Specialty Steel owns one of these brick plants and buys all of its production. The other brick manufacturer has recently developed an inexpensive new technology whereby ordinary clay can be used to make this fire brick. This significantly reduces the production cost of this type of brick.

Answer 1

Specialty Steel has less flexibility now than if it were not vertically integrated. (p. 167)

Question 2

Usually a company is classified as a single business firm when revenues generated by the dominant business are greater than ____ percent.

Answer 2

95

Question 3

Which of the following resources are more likely to create value in the diversification process?

Answer 3

tacit knowledge

Question 4

Among the value-neutral incentives to diversify, some come from the firm’s external environment while others are internal to the firm. External incentives to diversify include

Answer 4

changes in antitrust laws and regulations