Chapter 8 Corporate Strategy Models Full Test Bank

Student name:__________

Corporate strategy is focused solely on determining the geographic locations in which the firm should compete.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > TF Qu. 01 Corporate strategy is focused solely on dete...

All businesses are motivated by a need to grow.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives.
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > TF Qu. 02 All businesses are motivated by a need...

The internal and external costs associated with an economic exchange are known as interaction costs.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > TF Qu. 03 The internal and external costs associated w...

Firms are more capable than markets at coordinating highly complex tasks, while markets are more capable of providing high-powered incentives for entrepreneurship.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > TF Qu. 04 Firms are more capable than markets at coord...

Managers have exactly two choices when determining the boundaries of the firm: produce goods and services in-house (“make”) or purchase them externally (“buy”).
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Strategic Alliances
Source : Chapter 08 Test Bank > TF Qu. 05 Managers have exactly two choices when deter...

A firm stops purchasing components from suppliers and starts producing them in-house. This is known as forward vertical integration.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch
Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration
Source : Chapter 08 Test Bank > TF Qu. 06 A firm stops purchasing components...

When outsourced activities take place outside the home country, it is known as offshoring.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 2 Medium
Learning Objective : 08-06 Describe and examine alternatives to vertical integration.
Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration
Source : Chapter 08 Test Bank > TF Qu. 07 When outsourced activities take place...

A firm follows a related diversification strategy when it derives less than 25 percent of its revenues from a single business activity and obtains revenues from other lines of business linked to the primary business activity.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E
Source : Chapter 08 Test Bank > TF Qu. 08 A firm follows a related diversification strategy...

The most challenging diversification strategy is likely to be one that combines new core competencies with new and emerging markets.
1. ______

true
false

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 1 Easy
Learning Objective : 08-08 Apply the core competence–market matrix to derive different diversif
Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E
Source : Chapter 08 Test Bank > TF Qu. 09 The most challenging diversification strateg...

Firms that pursue extremely high or extremely low levels of diversification perform better than those that pursue moderate levels of diversification.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E
Source : Chapter 08 Test Bank > TF Qu. 10 Firms that pursue extremely high or extremel...

To gain and sustain competitive advantage, any corporate strategy must extend far beyond a firm’s business strategy.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it
Topic : What Is Corporate Strategy?
Source : Chapter 08 Test Bank > TF Qu. 11 To gain and sustain competitive advantage...

A firm that pursues unrelated diversification is often unable to create additional value.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Corporate Diversification and Firm Performance
Source : Chapter 08 Test Bank > TF Qu. 12 A firm that pursues unrelated diversification...

Hector, owner of Hector’s Trucking, wants to figure out if his business should diversify its range of services to gain an advantage over competitors. Business consultants have advised Hector to focus on the key question of where to compete. He would therefore be considering which of the following?
1. ______

his functional strategy

his transaction costs strategy

his corporate strategy

his external transaction costs strategy

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch
Topic : Types of Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 14 Hector, owner of Hector’s Trucking, wants...

Siobhan’s firm focuses only on design, marketing, and retailing, and it outsources all its other value chain activities. This firm has
1. ______

a high degree of vertical integration.

fully integrated all aspects of its value chain.

a low degree of vertical integration.

achieved economies of scale.

Billy is the founder and CEO of Billy’s Kicks, a soccer ball retailer. He decides to purchase a synthetic rubber manufacturing firm so he can create his own soccer balls and sell them nationally in his retail stores. Billy will engage in
1. ______

forward vertical integration.

backward vertical integration.

horizontal integration.

differentiation.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 2 Medium
Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch
Topic : Types of Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 15 Billy is the founder and CEO of Billy’s...

Jill is the CEO of Notes Etc., a stationery manufacturer. She decides to open up a retail store to sell her products directly to consumers instead of just selling wholesale to retailers. To do this, Jill will need to engage in
1. ______

forward vertical integration.

backward vertical integration.

horizontal integration.

differentiation.

Sanjay, owner of WashTubs, a washing machine company, is looking for an alternative to vertical integration. He decides to manufacture some of his own machine parts while keeping a few key suppliers in his industry value chain. This is known as
1. ______

a balanced scorecard.

forward vertical integration.

strategic offshoring.

taper integration.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-06 Describe and examine alternatives to vertical integration.
Topic : Alternatives to Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 17 Sanjay, owner of WashTubs, a washing...

A company that engages in strategic outsourcing reduces its level of
1. ______

vertical integration.

taper integration.

vertical market failure.

credible commitment.

Many financial service firms, IT firms, and health-care companies are among the most active when it comes to________, which occurs when value chain activities are taken care of outside the home country of the firm.
1. ______

strategic outsourcing

procurement

offshore outsourcing

diversification

Since Coca-Cola focuses on selling only non-alcoholic beverages, a low degree of product diversification, we would conclude that it competes in a(n)________ market versus its main competitor PepsiCo, which sells a wide variety of products.
1. ______

single product

multiple product

related diversification

unrelated diversification

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-06 Describe and examine alternatives to vertical integration.
Topic : Corporate Diversification: Expanding Beyond a Single Market
Source : Chapter 08 Test Bank > MC Qu. 20 Since Coca-Cola focuses on selling only...

Because Facebook receives almost all of its revenues from online advertising, we would conclude that it would be characterized as a(n)________ firm, which has the lowest levels of corporate diversification.
1. ______

single business

dominate business

related diversification

unrelated diversification

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Types of Corporate Diversification
Source : Chapter 08 Test Bank > MC Qu. 21 Because Facebook receives almost all of its ...

Jermaine’s Choppers sells Chandler Dogies, a special type of motorcycle. The business generates roughly 80 percent of its revenues from selling these motorcycles and about 20 percent on motorcycle repair and service. Jermaine’s Choppers would be classified as a________ firm.
1. ______

single business

dominant business

related diversification

unrelated diversification

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Types of Corporate Diversification
Source : Chapter 08 Test Bank > MC Qu. 22 Jermaine’s Choppers sells Chandler Dogies...

When examining the core competence–market matrix, the most challenging diversification strategy occurs when firms attempt to combine________ with________. If done successfully, the firm could have the potential for “mega-opportunities” that may lead to competitive advantage.
1. ______

new core competencies; new markets

new core competencies; existing markets

existing core competencies; existing markets

existing core competencies; new markets

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-08 Apply the core competence–market matrix to derive different diversif
Topic : Types of Corporate Diversification
Source : Chapter 08 Test Bank > MC Qu. 23 When examining the core competence–mar...

Salesforce is one of the leading providers of platform as a service (PaaS) tools and services. It developed a new competency in delivering software development that allows its customers to better customize their future needs. Viewing this through the lens of the core competence–market matrix, which of the following four options below does Salesforce best exemplify?
1. ______

Salesforce leveraged existing core competencies to improve its current market position.

Salesforce built new core competencies to protect and extend its current market position.

Salesforce redeployed and recombined existing core competencies to compete in markets of the future.

Salesforce built new core competencies to create and compete in markets of the future.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 08-08 Apply the core competence–market matrix to derive different diversif
Topic : Core Competencies
Source : Chapter 08 Test Bank > MC Qu. 24 Salesforce is one of the leading providers...

Projecta is a publicly traded company and a highly diversified firm. But Projecta’s most recent stock price is valued less than the sum of all its individual business units. Projecta is most likely experiencing a
1. ______

diversification discount.

diversification premium.

two for one split.

shareholder rights plan.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Types of Corporate Diversification
Source : Chapter 08 Test Bank > MC Qu. 25 Projecta is a publicly traded company and...

Danke is a diversified firm that creates more value than the cost that it incurs. As a result, it is experiencing a diversification premium in its stock price. Danke is able to accomplish all of the following except
1. ______

provide economies of scale, which reduces Danke’s costs.

exploit economies of scope, which increases Danke’s value.

increase its costs but maintain its current stock price.

reduce Danke’s costs and increase value.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Corporate Diversification and Firm Performance
Source : Chapter 08 Test Bank > MC Qu. 26 Danke is a diversified firm that creates more...

Anheuser-Busch InBev sold Busch Entertainment, its theme park unit that owns SeaWorld and Busch Gardens, to a group of private investors. This strategic move allows InBev to focus more fully on its core business of brewing and distributing beer across the world. This is an example of
1. ______

restructuring.

corporate diversification.

a business level strategy.

the core competence–market matrix.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Corporate Diversification and Firm Performance
Source : Chapter 08 Test Bank > MC Qu. 27 Anheuser-Busch InBev sold Busch Entertainmen...

Haoyu plans to restructure the portfolio of all his firm’s strategic business units, similar to how an investor might change a portfolio of stocks. To do this, Haoyu will more than likely employ which corporate planning tool?
1. ______

value chain analysis

Boston Consulting Group (BCG) growth-share matrix

diversification premium

VRIO

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Boston Consulting Group (BCG) Growth–Share Matrix
Source : Chapter 08 Test Bank > MC Qu. 28 Haoyu plans to restructure the portfolio...

Amerie is the strategic business unit (SBU) leader in charge of manufacturing men’s bow ties. While the market Amerie’s firm competes in is low growth, its SBU’s earnings and cash flow are both ranked high and stable. When examining Amerie’s SBU through the Boston Consulting Group (BCG) growth-share matrix lens, we can conclude that her SBU would be classified as a
1. ______

star.

dog.

question mark.

cash cow.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Boston Consulting Group (BCG) Growth–Share Matrix
Source : Chapter 08 Test Bank > MC Qu. 29 Amerie is the strategic business unit...

Rashad is the strategic business unit (SBU) CEO in charge of manufacturing stereo speakers for computers and laptops. His SBU earnings and cash flow are both low and unstable. Which of the following strategies should Rashad enact if examining his SBU through the Boston Consulting Group (BCG) growth-share matrix lens?
1. ______

hold

invest for growth

harvest and/or divest

allocate more resources for manufacturing

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Boston Consulting Group (BCG) Growth–Share Matrix
Source : Chapter 08 Test Bank > MC Qu. 30 Rashad is the strategic business unit...

BookWizard, a large online and offline book-selling company, decides to enter the college textbook market. Its goal is to create cobranded. university-specific websites that offer textbooks; clothing and accessories such as logo T-shirts and sweaters, baseball hats, and mugs; and a full range of peripheral items like notebooks, pens, art supplies, and the like. This scenario shows BookWizard’s pursuit of
1. ______

geographic diversification.

product diversification.

vertical integration.

horizontal integration.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 31 BookWizard, a large online and offline...

Decisions relating to the question of what stages of the industry value chain to participate in determine a firm’s
1. ______

level of diversification.

geographic scope.

vertical integration.

competitive strategy.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 32 Decisions relating to the question of...

Decisions relating to the range of products and services a firm will offer determine the firm’s
1. ______

level of diversification.

geographic scope.

vertical integration.

absorptive capacity.

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?
1. ______

first-line employees

creditors

chief executive officer

middle manager

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives.
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 34 Which of the following stakeholders of a com...

Isaac has been named CEO of a start-up online educational company. Isaac and other strategic leaders of the company will be setting the firm’s corporate strategy. Out of the following decisions, which will Isaac and his associates most likely make first?
1. ______

whether to pursue a differentiation or cost-leadership strategy

what range of products to offer

how to achieve the highest levels of customer satisfaction

which customer segments to target

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 35 Isaac has been named CEO of a start...

The managers at Acme Corporation decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the declining performance in this sector?
1. ______

by having higher performance in another sector

by sharing their market power

by increasing the firm’s risk in another sector

by motivating managers

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives.
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 36 The managers at Acme Corporation decided tha...

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale?
1. ______

increasing profits

lowering costs

reducing risk

motivating managers

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives.
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 37 There are many reasons why firms need to gro...

What is the name of the situation that can arise when strategic leaders pursue their own interests in conflict with the firm’s goals?
1. ______

opportunism

principal-agent problem

risk assessment

enforcement of contracts

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 38 What is the name of the situation that...

Soylent Corporation is a major nutritional supplement chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth?
1. ______

employing celebrity spokespeople

implementing automated soy-making machinery

purchasing competitors

increasing executive salaries

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives.
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 39 Soylent Corporation is a major nutritional s...

Which of the following is an example of an external transaction cost?
1. ______

the cost of setting up a production unit

the cost of searching for a contract manufacturer

the cost of recruiting and retaining employees

the cost of maintaining plant and machinery

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 40 Which of the following is an example of an e...

Which of the following is an example of an internal transaction cost?
1. ______

the cost of searching for a contract manufacturer

the cost of signing a contract with a supplier

the cost of buying raw materials

the cost of maintaining a production unit

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 41 Which of the following is an example of an i...

Tree Corporation recently acquired a smaller competitor, Branch and Associates, which specializes in issues not previously covered by Tree Corporation, such as intellectual property cases. Given the increase in the firm’s size and complexity, it is likely that its internal transaction costs will
1. ______

be eliminated.

decrease.

transition to external transaction costs.

increase.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 42 Tree Corporation recently acquired a...

A primary advantage of organizing economic activity within firms is the
1. ______

ability to coordinate highly complex tasks to allow for specialized division of labor.

low administrative costs because of reduced bureaucracy.

eradication of the principal-agent problem.

high-powered incentive to work as salaried employees for an existing firm.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 43 A primary advantage of organizing economic a...

Cumberland Computers will be buying processing chips needed for its laptops and tablets from external suppliers instead of manufacturing them in its own facilities. How will this decision affect the firm?
1. ______

The firm will have more flexibility in purchasing and comparing prices of goods and services.

The firm’s administrative costs will be low because of necessary bureaucracy.

The firm will be protected against the principal-agent problem.

The firm will have high-powered incentives, such as hourly wages and salaries.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 44 Cumberland Computers will be buying...

Managers in a firm hired to improve the firm’s profitability and ultimately the shareholders’ value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?
1. ______

diseconomies of scale

principal-agent problem

experience-curve effects

information asymmetries

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 45 Managers in a firm hired to improve the firm...

________ is best described as a situation in which one party possesses private information and is therefore better informed than another party.
1. ______

Information governance

Information asymmetry

Information deregulation

Information piracy

Real estate agent Jensen sold first-time homebuyer Mitch a house. On the surface, the house appeared to be in good shape, but it turns out it has hidden structural issues that will cost a lot to fix. Mitch is angry that Jensen withheld this key information. Which of the following does this scenario best illustrate?
1. ______

learning-curve effect

principal-agent problem

experience-curve effect

information asymmetry

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 47 Real estate agent Jensen sold first-time...

Massive Dynamic Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Massive Dynamic has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Massive Dynamic should
1. ______

continue to outsource production.

vertically integrate.

exit the laptop industry.

diversify its activities.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 3 Hard
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 48 Massive Dynamic Computers sources the compon...

A drawback of short-term contracting as an alternative to making a component in-house is that
1. ______

it is the most-integrated alternative to performing an activity so the principal company has no control over the agent.

the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.

it fails to allow a long planning period that individual market transactions provide.

the buying firm cannot demand lower prices due to the lack of a competitive bidding process.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > MC Qu. 49 A drawback of short-term contracting as an a...

________ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage.
1. ______

Embargos

Cartel agreements

Strategic alliances

Corporate acquisitions

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Strategic Alliances
Source : Chapter 08 Test Bank > MC Qu. 50 ________ are best described as voluntary arrang...

Initech developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Accent Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?
1. ______

licensing

franchising

crowdsourcing

bootlegging

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Alternatives to Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 51 Initech developed a superior touch scre...

Fast-food chain Taco Trio operates through a business model in which individuals can buy the rights to set up Taco Trio restaurants and sell the company’s food in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the individual restaurants have to offer a menu approved at Taco Trio headquarters, use the same interior color scheme and layout as the flagship restaurant, and maintain high-level customer service. Which of the following alternatives to integration does this best illustrate?
1. ______

crowdsourcing

franchising

credit rationing

bootstrapping

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Alternatives to Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 52 Fast-food chain Taco Trio operates through...

Wenonah Capital Partners asked one of its partners, a research and development (R&D) firm, to concentrate on developing new medications for Parkinson’s disease. But the project requires a huge capital investment, and the R&D partner has some reservations about Wenonah’s long-term commitment to the project. To prove its commitment, Wenonah pledges an investment of $200 million over five years. This investment by Wenonah in the project will result in a
1. ______

cartel.

credible commitment.

corrective action.

parent–subsidiary relationship.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Strategic Alliances
Source : Chapter 08 Test Bank > MC Qu. 53 Wenonah Capital Partners asked one of...

Openlane and Yearin Technologies have together invested and created a new organization, Globex Corporation, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Openlane and Yearin Technologies. Which of the following alternatives to integration does this scenario best illustrate?
1. ______

a joint venture

a franchisee

a licensing contract

a corporate acquisition

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Alternatives to Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 54 Openlane and Yearin Technologies have togeth...

How is an equity alliance different from a joint venture?
1. ______

An equity alliance involves ownership that facilitates transaction-specific ventures; a joint venture involves taking ownership by buying stock.

An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm.

An equity alliance involves taking ownership in a partner; a joint venture involves taking ownership by buying stock.

An equity alliance involves partners contributing equity to a joint venture; a joint venture involves two or more entities owning a firm.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Strategic Alliances
Source : Chapter 08 Test Bank > MC Qu. 55 How is an equity alliance different from a j...

U.S.-based consumer electronics corporation DGM owns a smaller company in Taiwan where most of DGM’s cell phone technology is made before being released worldwide. Which of the following alternatives to integration does this best illustrate?
1. ______

venture capitalism

parent–subsidiary relationship

joint venture

franchising

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Alternatives to Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 56 U.S.-based consumer electronics corporation...

________ is best described as a firm’s ownership of its production of needed inputs or of the channels by which it distributes its outputs.
1. ______

Venture capitalism

Bootlegging

Vertical integration

Crowdsourcing

Each stage of the vertical value chain typically represents a distinct________ in which a number of different firms are competing.
1. ______

industry

functional department

economy

customer segment

Condax Electronics relied on a large chain of consumer electronics stores to sell its tablet computers, cell phones, and televisions and also to provide customer service and technical support. However, that retailer outsourced its service departments, and customers began to complain that they could not get reliable tech support for Condax products. In response, Condax Electronics set up its own tech support department, and it also began to investigate opening its own brand-based retail stores. What does this scenario best illustrate?
1. ______

crowdsourcing

new product development

forward vertical integration

conglomerate diversification

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 3 Hard
Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch
Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 59 Condax Electronics relied on a large chain o...

Which of the following best illustrates forward vertical integration?
1. ______

A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.

A chain of ice cream parlors launches a brand of toys and accessories for children.

A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam.

A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch
Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 60 Which of the following best illustrates forw...

Nguyen Autos currently sources components such as airbags, upholstery, and brake pads from various suppliers in the industry value chain. In order to lower costs and reduce the risk of interruptions in the supply of components, Nguyen should pursue
1. ______

product diversification.

forward integration.

backward integration.

geographic diversification.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 08-05 Identify and evaluate the benefits and risks of vertical integration.
Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 61 Nguyen Autos currently sources components s...

Which of the following best illustrates physical-asset specificity?
1. ______

a unique training program developed in an organization

a ship container designed to carry more than the average load of iron ore

a generic machine that can be used to churn different mixtures

a machine solely designed to give a candy its trademarked shape

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-05 Identify and evaluate the benefits and risks of vertical integration.
Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 62 Which of the following best illustrates phys...

Which of the following best illustrates site specificity?
1. ______

equipment necessary for mining bauxite and aluminum smelting

bottling machinery to manufacture bottles with trademarked shapes

investment made in human capital to master procedures of a specific organization

investment made to train employees to operate computers

Which of the following is a drawback of vertical integration?
1. ______

It increases the difficulty of securing critical supplies.

It impedes scheduling and planning.

It increases the potential of legal repercussions.

It impedes investments in special assets.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-05 Identify and evaluate the benefits and risks of vertical integration.
Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 64 Which of the following is a drawback of vert...

VineRipe Tomato makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To accomplish this, VineRipe worked with its bottle manufacturer to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate?
1. ______

site specificity

research specificity

physical-asset specificity

human-asset specificity

Firms that use taper integration also use________ integration when they rely on outside-market firms for some of their supplies.
1. ______

backward vertical

forward vertical

backward horizontal

forward horizontal

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-06 Describe and examine alternatives to vertical integration.
Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 66 Firms that use taper integration also use ________...

Doncon Guitars is interested in pursuing backward integration to take greater ownership of the extraction of raw materials and production of components used in its signature line of guitars. Although this approach would lower the overall cost of producing a guitar, the costs associated with producing electronic pickups for sound amplification are far greater than those associated with sourcing pickups from a reliable supplier. Which of the following approaches is likely to produce superior results?
1. ______

Invest in vertical integration despite the cost of producing pickups.

Abandon the idea of vertical integration entirely.

Pursue taper integration.

Introduce a budget line of guitars to diversify the firm’s offerings.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 08-06 Describe and examine alternatives to vertical integration.
Topic : Alternatives to Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 67 Doncon Guitars is interested in pursuing bac...

Churchill-Perez International is a large conglomerate that procures a few component parts from external suppliers; it also owns subsidiaries that manufacture key raw materials. The firm does not solely depend on outside distributors to reach its customers. In fact, it has retail stores in the United States, Canada, and the United Kingdom that feature its products. In this scenario, which of the following alternatives to vertical integration is Churchill-Perez applying?
1. ______

concentric integration

taper integration

horizontal integration

conglomerate integration

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-06 Describe and examine alternatives to vertical integration.
Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration
Source : Chapter 08 Test Bank > MC Qu. 68 Churchill-Perez International is a large...

DreamHome operates in a number of countries and sells a wide variety of home goods, from garden furniture to kitchenware, to achieve continuous growth. From this data, we can conclude that DreamHome has been involved in
1. ______

product-market diversification.

process diversification.

strategic outsourcing.

lean manufacturing.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E
Source : Chapter 08 Test Bank > MC Qu. 69 DreamHome operates in a number of countries...

While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic U.S. market. What is the reason behind this strategic difference?
1. ______

KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company.

Chick-fil-A has a larger customer base and number of outlets in the U.S. market than its competitor KFC.

KFC wants to follow a differentiation strategy, and Chick-fil-A wants to pursue a cost-leadership strategy.

Chick-fil-A is part of a large conglomerate, whereas KFC has more flexibility to pursue a geographic diversification strategy.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E
Source : Chapter 08 Test Bank > MC Qu. 70 While KFC focuses on international markets, ...

J-Texon Manufacturing is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate?
1. ______

process diversification

product diversification

geographic diversification

market diversification

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E
Source : Chapter 08 Test Bank > MC Qu. 71 J-Texon Manufacturing is a large conglomerat...

Spain-based Coche Azul, a high-end automaker, has recently started selling its cars through company-owned outlets in major cities in Eastern Europe. Which of the following types of diversification strategies is Coche Azul pursuing?
1. ______

product diversification strategy

process diversification strategy

product-market diversification strategy

geographic diversification strategy

Singletechno Industries, a large U.S.-based conglomerate, competes in the hospitality, education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Singletechno Industries pursuing?
1. ______

zone pricing

niche marketing

product-market diversification strategy

process diversification strategy

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E
Source : Chapter 08 Test Bank > MC Qu. 73 Singletechno Industries, a large U.S.-based...

Sonron Corporation generates 85 percent of its annual revenues by manufacturing luxury cars. The company derives 15 percent of its annual revenues by selling sports merchandise such as apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Sonron Corporation?
1. ______

a conglomerate

a subsidiary

a dominant-business firm

a single-business firm

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E
Source : Chapter 08 Test Bank > MC Qu. 74 Sonron Corporation generates 85 percent...

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, we can conclude that the firm is using
1. ______

related-constrained diversification.

related-linked diversification.

strategic outsourcing.

offshore outsourcing.

Silis Autos is known for its affordable and reliable brand of consumer vehicles. Because its shareholders expect to see an improved rate of growth in the coming years, Silis’s executives have decided to diversify the company’s range of products so that at least 40 percent of the firm’s revenue is generated by new business units. However, the company’s resources, capabilities, and competencies are limited to producing other forms of motorized vehicles, such as motorcycles and all-terrain vehicles (ATVs). Which type of corporate diversification strategy should Silis pursue?
1. ______

dominant business

related-constrained

related-linked

unrelated

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E
Source : Chapter 08 Test Bank > MC Qu. 76 Silis Autos is known for its affordable and ...

Plexzap Products started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Plexzap pursuing in this scenario?
1. ______

taper integration strategy

niche marketing strategy

related-constrained strategy

related-linked strategy

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 3 Hard
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E
Source : Chapter 08 Test Bank > MC Qu. 77 Plexzap Products started as a luxury brand f...

Finjob is following a related-linked diversification strategy, and Rangreen is following a related-constrained diversification strategy. How do the two firms differ from each other?
1. ______

Rangreen Inc. generates 70 percent of its revenues from its primary business, while Finjob generates only 10 percent of its revenues from its primary business.

Rangreen pursues a backward diversification strategy, while Finjob pursues a forward diversification strategy.

Finjob will share fewer common competencies and resources between its various businesses when compared with Rangreen

Finjob pursues a differentiation strategy, and Rangreen pursues a cost-leadership strategy, to gain a competitive advantage.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 2 Medium
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E
Source : Chapter 08 Test Bank > MC Qu. 78 Finjob is following a related-linked di...

A firm follows a(n)________ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.
1. ______

related-constrained strategy

unrelated diversification strategy

differentiation strategy

dominant-business strategy

Funholding is a large multinational company active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company?
1. ______

a flagship brand

a single-business firm

a dominant-business firm

a conglomerate

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E
Source : Chapter 08 Test Bank > MC Qu. 80 Funholding is a large multinational com...

How does a conglomerate benefit from following an unrelated diversification strategy?
1. ______

The conglomerate can solely depend on its primary business activity for a major portion of its revenues.

The conglomerate can share most of its competencies in products, services, technology, or distribution between all its businesses.

The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.

The conglomerate can limit the learning- and experience-curve effects it faces.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification and Competitive Advantage
Source : Chapter 08 Test Bank > MC Qu. 81 How does a conglomerate benefit from followi...

The Tata group of India, Warren Buffet’s Berkshire Hathaway, and the Japanese Yamaha group have several strategic business units under one corporate umbrella and are pursuing an unrelated diversification strategy. We would refer to these businesses as
1. ______

differentiators.

conglomerates.

internal competitors.

vertically integrated.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification and Competitive Advantage
Source : Chapter 08 Test Bank > MC Qu. 82 The Tata group of India, Warren Buffet’s...

Why is following an unrelated diversification strategy especially advantageous in an emerging economy?
1. ______

It allows the conglomerate to overcome institutional weaknesses in emerging economies.

It allows the conglomerate to form a monopoly in emerging economies.

It allows the conglomerate to use well-defined legal systems in emerging economies.

It allows the conglomerate to take advantage of strong capital markets in emerging economies.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification and Competitive Advantage
Source : Chapter 08 Test Bank > MC Qu. 83 Why is following an unrelated diversificatio...

Plexzap Sodas has been a market leader in the soft drink industry for several decades. However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Plexzap is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence–market matrix, which diversification strategy should Plexzap pursue?
1. ______

Leverage existing core competencies to improve current market position.

Build new core competencies to protect and extend current market position.

Redeploy and recombine existing core competencies to compete in markets of the future.

Build new core competencies to create and compete in markets of the future.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 3 Hard
Learning Objective : 08-08 Apply the core competence–market matrix to derive different diversif
Topic : Corporate Diversification and Competitive Advantage
Source : Chapter 08 Test Bank > MC Qu. 84 Plexzap Sodas has been a market leader in th...

The core competency of Newex Motors is the fuel-efficient engine found in its cars. These engines are developed and built in-house. The company realizes that the growing demand for “green” vehicles has created a new market opportunity. Thus, it uses its existing technology to develop an engine that improves the fuel efficiency of recreational motorhomes. In this scenario, Newex Motors is
1. ______

leveraging existing core competencies to target the chasm between the early adopter and early majority market segment.

redeploying and recombining existing core competencies to compete in future markets.

building new core competencies to create and compete in future markets.

building new core competencies to protect and extend current market position.

Betasoloin Corp. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car, which uses both gas and electricity. In this scenario, Betasoloin is primarily
1. ______

leveraging new core competencies to improve current market position.

redeploying existing core competencies to compete in future markets.

unlearning existing core competencies to create and compete in markets of the future.

building new core competencies to protect and extend current market position.

Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola?
1. ______

It is leveraging existing core competencies to improve current market position.

It is building new core competencies to protect and extend its current market position.

It is redeploying and recombining existing core competencies to compete in markets of the future.

It is targeting the chasm between the early adopter and early majority market segment.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-08 Apply the core competence–market matrix to derive different diversif
Topic : Corporate Diversification and Competitive Advantage
Source : Chapter 08 Test Bank > MC Qu. 87 Coca-Cola was primarily known for its core c...

In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing customer relationship management (CRM) offering or build completely new types of software. This is an example of
1. ______

leveraging existing core competencies to improve current market position.

building new core competencies to achieve vertical integration.

redeploying and recombining existing core competencies to compete in markets of the future.

building new core competencies to create and compete in markets of the future.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-08 Apply the core competence–market matrix to derive different diversif
Topic : Corporate Diversification and Competitive Advantage
Source : Chapter 08 Test Bank > MC Qu. 88 In 2007, Salesforce.com recognized an emergi...

Which quadrant in the core competence–market matrix is the hardest to pursue?
1. ______

building new core competencies to protect and extend current market position

building new core competencies to create and compete in markets of the future

leveraging core competencies to improve current market position

redeploying and recombining core competencies to compete in markets of the future

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-08 Apply the core competence–market matrix to derive different diversif
Topic : Tools for Analyzing Diversification Strategies
Source : Chapter 08 Test Bank > MC Qu. 89 Which quadrant in the core competence–...

HydraOne is a large multinational conglomerate. As a single business unit, the company’s stock price is estimated to be $250. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $350. In this scenario, what is HydraOne experiencing?
1. ______

experience curve effects

learning-curve effects

diversification discount

economies of scale

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Corporate Diversification and Competitive Advantage
Source : Chapter 08 Test Bank > MC Qu. 90 HydraOne is a large multinational conglomerate...

Ganjaflex Industries is a major multinational conglomerate. Its business units compete in a range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company’s revenues. Which of the following is most likely true of Ganjaflex’s stock price?
1. ______

It is valued at less than the sum of its individual business units.

It is valued at greater than the sum of individual business units.

It is valued at the exact sum of individual business units.

It is consistently lower than the industry average.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Corporate Diversification and Competitive Advantage
Source : Chapter 08 Test Bank > MC Qu. 91 Ganjaflex Industries is a major multinationa...

Betatech Group is the parent company of many related businesses under its banner. Each share of the parent company is quoted at $220. However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share. In this scenario, what has Betatech Group created?
1. ______

capital liquidity

diversification premium

diversification discount

demand-pull inflation

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Corporate Diversification and Competitive Advantage
Source : Chapter 08 Test Bank > MC Qu. 92 Betatech Group is the parent company of many...

Hottechi Inc., a large multinational conglomerate, had begun to experience declining revenues. The top management decided it was important for the company to avoid deviating from its core competencies. Thus, a few of the company’s key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, Hottechi is involved in
1. ______

reverse engineering.

benchmarking.

restructuring.

crowdsourcing.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Restructuring Strategies
Source : Chapter 08 Test Bank > MC Qu. 93 Hottechi Inc., a large multinational conglom...

The Boston Consulting Group (BCG) growth-share matrix locates a firm’s individual strategic business units (SBUs) in which two dimensions?
1. ______

start-up capital required and stage of industry life cycle

relative market share and speed of market growth

economic value created and costs incurred

amount of debt financing and equity financing

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Tools for Analyzing Diversification Strategies
Source : Chapter 08 Test Bank > MC Qu. 94 The Boston Consulting Group (BCG) growth...

In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under “dog,” the management should consider
1. ______

infusing more capital into the strategic business unit.

providing more human resources to the business.

holding the business until it turns into a “star.”

divesting the strategic business unit.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Tools for Analyzing Diversification Strategies
Source : Chapter 08 Test Bank > MC Qu. 95 In the context of the Boston Consulting Grou...

Konmatfix Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop computer SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to low growth in the desktop market and the popularity of tablets and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop computer SBU will be categorized under
1. ______

star.

question mark.

dog.

cash cow.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Tools for Analyzing Diversification Strategies
Source : Chapter 08 Test Bank > MC Qu. 96 Konmatfix Inc., a large consumer electronics...

Shapiro-Rennart is a large conglomerate. In the context of the Boston Consulting Group (BCG) growth-share matrix, the company’s healthy-living strategic business unit (SBU) has been categorized as a “cash cow,” and its tobacco SBU has been categorized as a “dog.” Which of the following can be inferred from this scenario?
1. ______

While the tobacco SBU operates in a low-growth market, the healthy-living SBU operates in a high-growth market.

The management of the company should use the cash inflow from the healthy-living SBU and invest it in the tobacco SBU.

While the market share of the company in the healthy-living industry will be high, the market share in the tobacco industry will be low.

The tobacco SBU should follow a backward integration strategy, and the healthy-living SBU should pursue a forward integration strategy.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Tools for Analyzing Diversification Strategies
Source : Chapter 08 Test Bank > MC Qu. 97 Shapiro-Rennart is a large conglomerate...

The smartphone division of the large consumer electronics company Streethex has a significant market share in the always-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the context of the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of Streethex will be categorized under
1. ______

question mark.

star.

cash cow.

dog.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Tools for Analyzing Diversification Strategies
Source : Chapter 08 Test Bank > MC Qu. 98 The smartphone division of the large consume...

Hatfan Inc. is a large automobile company. In the context of the Boston Consulting Group (BCG) growth-share matrix, the company’s petrol cars strategic business unit (SBU) has been recognized as a “cash cow,” and its hybrid electric cars SBU has been categorized under “star.” Which of the following can be inferred from this scenario?
1. ______

The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.

The petrol cars SBU will have a relatively low market share in its industry, whereas the hybrid electric cars SBU will have the least market share in its industry.

The strategic recommendation for the hybrid electric cars SBU will be to harvest it, whereas for the petrol cars SBU, the company should just maintain it.

The petrol cars SBU is more important than the hybrid electric cars SBU in terms of future growth for the company.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Tools for Analyzing Diversification Strategies
Source : Chapter 08 Test Bank > MC Qu. 99 Hatfan Inc. is a large automobile company...

Using the Boston Consulting Group growth-share matrix, the managers of Fasehatice International determined that their business unit devoted to personal health monitoring devices was a “star.” Based on this finding, which of the following strategies is likely to produce the best results?
1. ______

Increase investment in the personal health monitoring unit to encourage future growth.

Seek to lower costs in the personal health monitoring unit to increase market share.

Harvest as much cash flow as possible before shutting the business down.

Immediately divest from the personal health monitoring industry.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Tools for Analyzing Diversification Strategies
Source : Chapter 08 Test Bank > MC Qu. 100 Using the Boston Consulting Group growth...

A strategy of________ will be most beneficial for a firm to enhance its overall corporate performance.
1. ______

unrelated level of diversification

single-business level of diversification

dominant-business level of diversification

related-linked diversification

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Related Diversification vs. Unrelated Diversification
Source : Chapter 08 Test Bank > MC Qu. 101 A strategy of ________ will be most beneficial ...

________ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.
1. ______

Fixed costs

Influence costs

Coordination costs

Opportunity costs

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Related Diversification vs. Unrelated Diversification
Source : Chapter 08 Test Bank > MC Qu. 102 ________ are best described as costs that occur...

________, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another.
1. ______

Coordination costs

Fixed costs

Agency costs

Network costs

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Related Diversification vs. Unrelated Diversification
Source : Chapter 08 Test Bank > MC Qu. 103 ________, which are incurred when pursuing a re...

Thirty years ago, Raleigh Outdoors created a lightweight, easy-to-erect tent that became a runaway bestseller. Fifteen years later, the tent market reached the maturity stage and sales slowed down. However, by this time, Raleigh Outdoors had developed a strong brand name and continued to lead the market. In the context of the Boston Consulting Group (BCG) growth-share matrix, which of the following describes this scenario?
1. ______

Raleigh was a star that developed into a cash cow.

Raleigh was a question mark that developed into a star.

Raleigh was a dog that developed into a question mark.

Raleigh was a cash cow that developed into a star.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Tools for Analyzing Diversification Strategies
Source : Chapter 08 Test Bank > MC Qu. 104 Thirty years ago, Raleigh Outdoors created...

Blackzim entered the low-priced digital watch market several years ago. This firm’s earnings have been unsteady but might be growing. In the context of the Boston Consulting Group (BCG) growth-share matrix, Blackzim is a
1. ______

cash cow.

star.

dog.

question mark.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Tools for Analyzing Diversification Strategies
Source : Chapter 08 Test Bank > MC Qu. 105 Blackzim entered the low-priced digital...

What must executives decide when formulating a corporate strategy?

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > SA Qu. 106 What must executives decide when formulating...

List the five reasons why firms need to grow.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives.
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > SA Qu. 107 List the five reasons why firms need to grow...

Why are generic industry value chains called vertical value chains?

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 2 Medium
Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives.
Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration
Source : Chapter 08 Test Bank > SA Qu. 108 Why are generic industry value chains called...

Discuss the underlying concepts that help executives make corporate strategic decisions.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives.
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > SA Qu. 109 Discuss the underlying concepts that help ex...

What are the advantages and disadvantages of organizing economic activity within firms?

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom
Topic : Corporate Strategy
Source : Chapter 08 Test Bank > SA Qu. 110 What are the advantages and disadvantages of...

How are information asymmetries created? What are the implications?

Describe the two types of vertical integration along the industry value chain.

What is one key risk of vertical integration?

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-05 Identify and evaluate the benefits and risks of vertical integration.
Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration
Source : Chapter 08 Test Bank > SA Qu. 113 What is one key risk of vertical integration?

Discuss the benefits of taper integration.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-06 Describe and examine alternatives to vertical integration.
Topic : Vertical Integration along the Industry Value Chain
Source : Chapter 08 Test Bank > SA Qu. 114 Discuss the benefits of taper integration.

Discuss the various general diversification strategies available to a firm.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 2 Medium
Learning Objective : 08-06 Describe and examine alternatives to vertical integration.
Topic : Define Corporate Diversification, Evaluate the Types of Corporate Diversification, and Unders
Source : Chapter 08 Test Bank > SA Qu. 115 Discuss the various general diversification ...

What is a conglomerate? How does it benefit from a diversification strategy?

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Corporate Diversification and Competitive Advantage
Source : Chapter 08 Test Bank > SA Qu. 116 What is a conglomerate? How does it benefit ...

Explain the two types of related diversification strategy with the help of examples.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 08-07 Describe and evaluate different types of corporate diversification.
Topic : Related Diversification vs. Unrelated Diversification
Source : Chapter 08 Test Bank > SA Qu. 117 Explain the two types of related diversifica...

What options do strategic leaders have to formulate corporate strategy once they have a clear understanding of their firm’s core competencies?

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-08 Apply the core competence–market matrix to derive different diversif
Topic : Corporate Diversification and Competitive Advantage
Source : Chapter 08 Test Bank > SA Qu. 118 What options do strategic leaders have to formulate c...

Discuss the application of the core competence–market matrix.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 1 Easy
Learning Objective : 08-08 Apply the core competence–market matrix to derive different diversif
Topic : Tools for Analyzing Diversification Strategies
Source : Chapter 08 Test Bank > SA Qu. 119 Discuss the application of the core competen...

Briefly discuss the application of the Boston Consulting Group (BCG) growth-share matrix.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Tools for Analyzing Diversification Strategies
Source : Chapter 08 Test Bank > SA Qu. 120 Briefly discuss the application of the Bosto...

Describe the major differences between taper integration and strategic outsourcing.

Which area of the core competence–market matrix is the most challenging diversification strategy, and why?

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-08 Apply the core competence–market matrix to derive different diversif
Topic : Core Competencies
Source : Chapter 08 Test Bank > SA Qu. 122 Which area of the core competence–market...

What is a diversification-performance relationship, and how do different diversification levels affect firm performance?

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an
Topic : Core Competencies
Source : Chapter 08 Test Bank > SA Qu. 123 What is a diversification-performance...

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Chapter 8 Corporate Strategy Models

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