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Exam 7: Vertical Integration and Outsourcing

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Question 31

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What are the dangers of vertical integration?

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Vertical integration occurs when a compa...

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Question 32

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Which of the following examples correctly depicts a company that uses a transaction-specific asset?

A) Indigo Inc., a company that manufactures faucets
B) Eclipse Corp., a company that manufactures pens and sells them through distributors
C) BLC Corp., a company that uses heavily customized software to manufacture airplane seats
D) Vertigo LLC, a company that sources raw material from suppliers to manufacture dinnerware

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Question 33

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Sport Soles Inc., a sports footwear manufacturing company, makes athletic shoes with rubber soles. In order to maximize its value and profit, Sport Soles sets up its operations right next to rubber tree fields. This way, the company gets easy access to its main raw material. In the context of vertical integration, this scenario illustrates that Sport Soles Inc. is exercising _________.

Vertical integration can be best defined as _________.

Violet Inc. has been undertaking a lot of responsibilities as a company in order to be the best in its industry. Over time, however, these responsibilities become tough to handle and the company finds it difficult to efficiently manage the time and effort to perform its activities. In contrast, other firms in the industry that outsource some of their activities to smaller companies find it easier to generate more profit than Violet Inc. The situation faced by Violet Inc. in this example illustrates one of the important disadvantages of vertical integration that is _________.

The chief executive officer (CEO) of Ecos Inc., a well-established firm in the real estate industry states that the firm has the resources to outperform its competitors. In the context of reasons for vertical integration, the CEO is referring to the firm's _________.

Coral Corp. is a company that initially used to manufacture handbags. It has now set up a store in which it sells its own products rather than supplying them to different stores. This initiation by Coral Corp. best illustrates _________.

Which of the following companies is most likely to experience the benefits of outsourcing?

Which of the following is an example of a vertically-specialized company?

A production house called Script Creations Inc. initiated a strategy for making its next movie. It invited a mass of people to create short documentaries on a social theme. As per the terms and conditions, Script Creations would select top three short stories to create an overall complete movie. This initiation by Script Creations Inc. is an example of _________.

Explain the three Cs of vertical integration.

In this context of the three Cs of vertical integration, which of the following scenarios accurately depicts capabilities?

BHG Corp. is a glass manufacturing company that specializes in float glasses. The company manufactures float glass through various stages of melting and refining, coating, and annealing. It is then inspected and cut according to customer requirements. This manufacturing process performed by BHG Corp. is termed as _________.

Teal Motors Inc., an automobile company, outsources the manufacturing of most of the automobile parts to several other companies that specialize in making parts such as ignition boxes, coil wires, and grills. Teal Motors makes sure to get these parts manufactured at a much lesser rate than it would if it manufactures its own parts. In this scenario, Teal Motors Inc. is effectively avoiding a _________.

A supplier that is contracted to create and provide a customized input to a local firm is called a(n) _________.

Identify a true statement about vertically integrated companies.

The country of Lydania has a complex network of pipelines that transports natural gas for millions of people. These pipelines are specifically designed for the transportation of natural gas and have limited uses outside the natural gas industry because of inherent industry regulations. These pipelines exemplify a(n) _________.

The sequence of all activities that are performed by a firm to turn raw materials into a finished product that is sold to a buyer best describes the term _________.

Nate, the managing director of Juniper Inc., believes that instead of making auto parts on its own, it should rather outsource these tasks to other companies so that the company can focus only on the critical aspects of the final product. His colleague, Salma, believes that the company would have more competitive advantage if it made its own auto parts. Which of the following statements strengthens Nate's belief?

In the context of the three Cs of vertical integration, under what conditions should a firm choose to engage in vertical integration?