Exam 7: Corporate Stategy

A) because those industries are old-fashioned and behind-the-times.
B) because in some industries the conditions favouring further vertical integration outweigh the benefits of focusing and outsourcing.
C) because those industries have probably sought no advice from academics, or taken no notice of the advice.
D) a and c.

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B

A) externally and internally sourced inputs.
B) internally and externally sourced inputs.
C) market and alliance sourced inputs.
D) joint venture and alliance sourced inputs.

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A) there's a saving on advertising costs.
B) there's no commission payable to the internal human resources department.
C) employees can be transferred rather than hired / fired, and the firm knows these people well.
D) the firm does not need to invest so much in training new recruits.

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C

A) in terms of its product, geographic and vertical scope.
B) in terms of its geographic and vertical scope.
C) in terms of its geographic and product scope.
D) This is not true. Some firms narrow some aspects of their scope, or voluntarily even break up.

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A) the need for managers to understand a wider range of businesses.
B) the need for managers to operate differently to succeed in different businesses.
C) the extent of the linkages between the various businesses.
D) all of the above.

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A) top managers have a complete knowledge of the entire value chain.
B) the capital invested and the fixed costs are often much higher for a vertically integrated firm.
C) a decline in sales and profits in the end market affects all stages simultaneously.
D) b and c.

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A) managers do not have sufficient understanding of other industries.
B) diversification is simply a poor strategy.
C) shareholders can invest in other industries themselves, achieving risk-reduction more efficiently.
D) all of the above.

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A) a franchise agreement
B) an exclusive single-supplier agreement
C) a long-term agreement with competitors to fix the market price for a commodity product
D) a joint development group between a supplier and a customer

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A) growth, risk reduction and value creation.
B) risk reduction and economies of scope.
C) value creation and cost reduction.
D) cash balancing and risk reduction.

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A

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A) increased vertical integration.
B) decreased horizontal integration.
C) de-integration or disaggregation.
D) b and c.

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A) The first describes the regions of the world where the firm is present and the second the stages of the industry value chain which the firm performs itself.
B) The first describes the number of countries and the second the number of horizontal businesses where the firm is present.
C) The two are highly inter-related.
D) It's not always clear what the difference is.

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A) the linkages or synergies between the businesses concerned.
B) risk reduction through balancing of counter-cyclical businesses.
C) getting a price reduction when purchasing common resource inputs.
D) balancing of cash generation, reducing the need to obtain investment finance externally.

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A) it is always best to source inputs from the open market.
B) it is always best to integrate key inputs, to maintain full control.
C) it is best to operate with a mix of both options.
D) it depends very much on the circumstances whether it's best to source from the market or vertically integrate.

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