Question 1

Markus United Inc., a soap manufacturing company, maintained strategic advantage over other companies by retaining profits in a unique way. The company bought a few distributors in order to improve efficiency and cut down transportation costs while distributing its products to retail stores. The company generated more profits than its competitors this way. This is an example of _________.

Accepted Answer

Forward integration involves acquiring distributors or retailers as a way to increase control over the distribution process, reduce costs, and improve efficiency. This is exactly what Markus United Inc. did by buying distributors to improve efficiency and cut down transportation costs while distributing its products to retail stores. Horizontal diversification involves expanding into new products or services that are unrelated to the company's existing products or services. Backward integration involves acquiring suppliers to gain control over the supply chain. Horizontal specialization is not a recognized business strategy.

Question 2

Rest & Sleep Inc. is a mattress manufacturing firm. By manufacturing related products such as bed covers, comforters and quilts, and pillows, it has gained significant competitive advantage as it has managed to create profits in all these markets as well. Rest & Sleep creates a challenge for the other companies in the market by providing unique value through its customer services and warranties. Which of the following terms best describes what Rest & Sleep Inc. is practicing?

Accepted Answer

Rest & Sleep Inc. is practicing corporate strategy by expanding its product line within the same industry, thereby creating a broader range of products related to its core business (mattresses) such as bed covers, comforters, quilts, and pillows. This approach allows the company to leverage its existing capabilities and market presence to gain a competitive advantage.

Question 3

Virgo Inc. earns less than 70 percent of its revenue from manufacturing computers. It recently started manufacturing tablets. The company made use of existing technology and materials and decided to distribute the tablets through the same distributors used for its computers. In this scenario, Virgo Inc. chose _________.

Accepted Answer

Virgo Inc. is using related-constrained diversification because it is leveraging existing technology, materials, and distribution channels, which indicates a close relation to its current operations.

Question 4

Which of the following is an example of a horizontal diversification?

Accepted Answer

Horizontal diversification involves a company expanding its product line or entering into new markets with new products. Choice A, a new company selling a new product in the market, fits this definition as it implies entering a new market with a new offering.

Question 5

A dominant vertical business differs from a dominant business in that a dominant business ________.

Accepted Answer

A dominant business earns a significant portion of its revenue from business lines across different value chains, unlike a dominant vertical business which focuses on businesses along the same value chain.

Question 6

Which of the following statements is true of a dominant vertical business?

Accepted Answer

The answer of Which of the following statements is true...

Question 7

Saturn Inc. is an e-commerce company that sells home appliances. The firm recently started selling its line of packaged food items online. In this scenario, Saturn Inc. chose _________.

Accepted Answer

Saturn Inc. is expanding its product line into a related field (from home appliances to packaged foods) which falls under related diversification. Additionally, as the new product line is linked to the existing line, it can be classified as related-linked diversification.

Question 8

Movement into adjacent markets by a firm along its own value chain can be best termed _________.

Accepted Answer

Movement into adjacent markets along a firm's own value chain is typically referred to as vertical integration. This involves expanding into markets that are either upstream or downstream in the value chain, with the goal of gaining greater control over the supply chain and reducing costs. Horizontal specialization refers to a firm narrowing its focus on a single aspect of the value chain. Horizontal diversification involves a firm entering into new and unrelated markets. Unrelated diversification is when a company enters into completely unrelated industries or markets.

Question 9

Pisces Corp. is an apparel manufacturing company. It purchased a few of its raw material suppliers and set up their factories close to the clothing stores so that the company does not have to invest on transportation charges. This is an example of _________.

Accepted Answer

Pisces Corp. purchasing its raw material suppliers and setting up their factories close to the clothing stores is an example of backward integration, as it involves gaining ownership or control over suppliers.

Question 10

Pluto Corp. has been manufacturing hardware materials for its existing customer base for several years. Recently, the company introduced a new line of electronic products to its customers. Pluto Corp. is engaging in _________.

Accepted Answer

Pluto Corp. is engaging in horizontal diversification by adding a new line of products (electronic products) that are different from its existing product line (hardware materials) but targeting the same customer base. Horizontal diversification involves expanding into new product lines or markets that are related or complementary to the company's existing business, aiming to reach a broader market or offer more variety to current customers.

Question 11

The main focus of Neptune Corp. is to sell apparel, which amounts to 70 percent of its revenue. It also runs warehouses, distribution centers, and logistics as additional businesses that generate the rest of the 30 percent of the earnings. Which level of diversification is followed by Neptune Corp.?

Accepted Answer

The answer of The main focus of Neptune Corp. is...

Question 12

Sparkle LLC, a beverage industry, earns almost all of its profits only by selling beverages. Sparkle LLC can be best categorized as a _________.

Accepted Answer

Sparkle LLC earns all its profits from selling beverages, indicating that it operates in a single business model.

Question 13

Venus Inc. is a large firm that sells several healthcare products such as bathing soaps, shampoos, body creams, and baby products. Each of these products has its own customer base. Individually, each of these products has upheld unique approaches to establish and maintain competitive advantage over its own rival companies that sell similar products. Which of the following strategies does Venus Inc. use for its products?

Accepted Answer

The description provided clearly indicates that each of Venus Inc.'s products has its own customer base and unique approach to competitive advantage. This suggests that Venus Inc. uses a business unit strategy, which involves developing strategies for each individual business unit within the company. This allows for flexibility in responding to the specific needs and challenges of each product line. The other choices are less likely to be applicable based on the information provided.

Question 14

Which of the following is a defining feature of firms that practice related-constrained diversification?

Accepted Answer

Related-constrained diversification involves firms that earn less than 70 percent of their revenues from their main line of business and have other lines of business that share product, technological, and distribution linkages with the main business. This allows the firm to leverage its existing expertise and resources to enter into related markets.

Question 15

Which of the following statements is true of a corporate strategy?

Accepted Answer

A corporate strategy involves the overall direction and scope of an organization and includes decisions about the industries or business in which to compete and the allocation of resources to various businesses. Option B is the only option that explains the concept of operating in adjacent businesses or markets along with the core industry, which is a part of the corporate strategy. options A, C, and D are incorrect as they do not accurately define a corporate strategy.

Question 16

The movement into an adjacent, or unrelated, market that is not along a firm's own value chain defines the term _________.

Accepted Answer

Horizontal diversification is the movement into an adjacent or unrelated market that is not along a firm's own value chain. Vertical specialization refers to a firm focusing on a specific stage of the value chain, while forward and backward integration involve a firm expanding into activities that are either closer or further away from its core value chain activities.

Question 17

Brentwood Industries, a furniture company, bought a supplier factory that creates raw materials for the whole range of products Brentwood manufactures. Brentwood has made sure not to look for outside sources for providing the company's raw materials. Brentwood Industries is practicing _________.

Accepted Answer

Brentwood Industries is practicing vertical integration by buying a supplier factory that creates raw materials for the whole range of products they manufacture. This means that Brentwood now controls the entire supply chain, from raw materials to the finished product.

Question 18

Movement by a firm along its own value chain in the direction of sales, service, or warranty operations is termed _________.

Accepted Answer

Forward integration refers to the movement of a firm towards sales, service or warranty operations, which are closer to the end customer. This can involve integrating with suppliers or distributors to gain greater control over the value chain and increase competitiveness.

Question 19

The search for competitive advantage within a single industry, market, or line of business best defines the term _________.

Accepted Answer

Business unit strategy is the search for competitive advantage within a single industry, market, or line of business. Complementary service strategy refers to offering additional services that enhance the value of a core product or service. Corporate strategy involves making decisions about which industries to enter or exit, while cost advantage strategy refers to achieving a lower cost structure than competitors.

Question 20

Marble Cakes Inc., after serving a good number of customers in its home state, has set up business in three other states with additional menu options of cupcakes, donuts, and coffees to generate new customers. This has enabled the company to successfully maintain its corporate strategy. Marble Cakes Inc. is engaging in _________.

Accepted Answer

Marble Cakes Inc. is engaging in horizontal diversification by expanding its business in other states and adding new menu options to attract new customers.

Quiz 6: Corporate Strategy