Chapter 9 - Corporate-level strategy: horizontal integration, vertical integration, and strategic outcsourcing

Question 1

Define Horizontal integration

Answer 1

Acquiring or merging with industry competitors to achieve the competitive advantage that arise from a large size and scope of operations

Question 2

Define Acquisition

Answer 2

Company used its capital resources to purchase another company

Question 3

Define Merger

Answer 3

Agreement between two companies to pool their resources and operations and join together to better compete in a business or industry

Question 4

Define Vertical integration

Answer 4

When a company expands its operations either backward or forward into an industry

Question 5

Define Backward vertical integration

Answer 5

Producing inputs for the company’s products

Question 6

Define Forward vertical integration

Answer 6

Uses, distributes, or sells the company’s products

Question 7

Define Vertical disintegration

Answer 7

When a company decides to exit industries either forward or backward in the industry value chain to its core industry to increase profitability

Question 8

Define Competitive bidding strategy

Answer 8

Short-term contract
Independent component suppliers compete to be chosen to supply a particular component

Question 9

Define Strategic alliances

Answer 9

Long-term agreements between two or more companies to jointly develop new products or processes

Question 10

Define Modularity

Answer 10

Degree to which a system’s components can be seperated and recombined

Question 11

Define Platform ecosystem

Answer 11

System of mutually dependent entities mediated by a stable core

Question 12

Define Hostage taking

Answer 12

Means of exchanging valuable resources to guarantee that each partner to an agreement will keep its side of the bargain

Question 13

Define Credible commitment

Answer 13

Belivable promise or pledge to support the development of a long-term relationship between companies

Question 14

Define Parallel sourcing policy

Answer 14

A company enters into long-term contracts with at least two suppliers for components to prevent incidents of opportunism

Question 15

Define Strategic outsourcing

Answer 15

Decision to allow one or more of a company’s value chain activities to be performed by independent, specialist companies

Question 16

Define Virtual corporation

Answer 16

Companies that pursue extensive strategic outsourcing to the extent that they only perform the central value creation functions that leads to competitive advantage

Question 17

Define Holdup

Answer 17

Risk that a company will become too dependent upon the specialist provider of an outsourced activity