Chapter 6

Question 1

corporate level strategy should create value:

Answer 1

such that the value of the corporate whole increases
such that businesses forming the corporate whole are worth more than they would under independent ownership
equity holders cannot create through portfolio investing

Question 2

a corporate level strategy should create ______ that are not available in equity markets.

Answer 2

synergies

Question 3

the “forms” in which economic exchange can take place:

Answer 3

markets and integrated hierarchies

Question 4

______ makes sense when the focal firm can capture more value than a market exchange provides.

Answer 4

integration

Question 5

leverage capabilities

Answer 5

firm capabilities may be sources of competitive advantage in other businesses (if not then don’t integrate exchange)

Question 6

manage opportunism

Answer 6

opportunism may be checked by internalizing (TSI) (internalizing must be less costly than opportunism)

Question 7

exploit flexibility

Answer 7

internalizing is usually less flexible (flexibility is prized when uncertainty is high)

Question 8

rarity of vertical integration

Answer 8

strategy is rare or not with respect to the value created by the strategy

Question 9

the form ____ usually is not costly to imitate.

Answer 9

is