Chapter 6

Question 1

business strategy

Answer 1

a firm’s theory of how to gain competitive advantage in a single business or industry

Question 2

corporate strategy

Answer 2

firm’s theory of how to gain competitive advantage by operating in several businesses simultaneously

Question 3

value chain

Answer 3

set of activities that must be accomplished to bring a product or service from raw materials to the point that it can be sold to a final customer

Question 4

vertical integration

Answer 4

the number of steps in this value chain that a firm accomplishes within its boundaries

Question 5

backward vertical integration

Answer 5

when it incorporates more stages of the value chain within its boundaries and those stages bring it closer to the beginning of the value chain

Question 6

forward vertical integration

Answer 6

when it incorporates more stages of the value chain and those stages bring it closer to the end of the value chain

Question 7

opportunism

Answer 7

exists when a firm is unfairly exploited in an exchange

Question 8

transaction specific investment

Answer 8

any investment in an exchange that has significantly more value in the current exchange than it does in alternative exchanges

Question 9

flexibility

Answer 9

how costly it is for a firm to alter its strategic and organizational strategy

Question 10

executive committee

Answer 10

CEO and senior managers

Question 11

operations committee

Answer 11

CEO and each head of the departments

Question 12

firm specific investments

Answer 12

investments made by employees that have more value in a particular firm than in alternative firms

Question 13

stock grants

Answer 13

payments to employees in a firm’s stock

Question 14

stock options

Answer 14

the right but not the obligation to purchase a companies stock