Question 1

Which of the following is a benefit that fmns should expect to gain from the use of horizontal integration?
A)Reduced risk of corning into conflict with the FTC
B)Better realization of economies of scale
C)Greater control over the entire supply chain
D)Reduced risk of holdup
E)Reduced need for investment in core activities

Accepted Answer

Horizontal integration involves merging with or acquiring companies that are in the same industry or at the same stage in the supply chain. This can result in economies of scale, which allow the firm to produce more efficiently and at a lower cost. Therefore, option B is the correct answer. Options A, C, D, and E are not necessarily associated with horizontal integration.

Question 2

The final part of the strategy formulation process is:
A)choosing business-level strategies.
B)choosing functional-level strategies.
C)choosing corporate-level strategies.
D)choosing functional-level goals. 
E)choosing business-level goals.

Accepted Answer

The final part of the strategy formulation process is choosing corporate-level strategies, which involves determining the scope of the organization and identifying the businesses in which it will compete. This includes decisions on diversification, mergers and acquisitions, and alliances, as well as identifying the best way to allocate resources across different business units or products. Choosing business-level strategies (A) and functional-level strategies (B) typically come before this stage, as they relate to specific activities within a business unit, while choosing functional-level goals (D) and business-level goals (E) are more specific and operational than the final stage of corporate-level strategy formulation.

Question 3

Competitive bidding makes suppliers reluctant to make investments that tie them closely to their trading partners.

Accepted Answer

Competitive bidding creates an environment where suppliers are focused on winning contracts, which means they may not want to make investments in technology, equipment or other resources that tie them closely to their trading partners. This is because doing so could limit their ability to compete on price or other factors in future bidding rounds.

Question 4

Strategic alliance is a type oflong-terrn contract that involves one company taking over another company.

Accepted Answer

Strategic alliance is a type of partnership agreement between two or more companies where they combine resources and work towards a common goal, without necessarily involving one company taking over another.

Question 5

In a strategic alliance, one of the companies that's part of the agreement benefits more than the other.

Accepted Answer

A strategic alliance is designed to be mutually beneficial, where all parties involved gain advantages that they could not achieve independently.

Question 6

Even though companies may invest in specialized assets to build competitive advantage, it is seldom necessary that suppliers do so.

Accepted Answer

Suppliers may also invest in specialized assets to build competitive advantage, particularly if they are serving a niche or specialized market.

Question 7

is the process of acquiring or merging with industry competitors to achieve the competitive advantages.
A)Tapered integration
B)Vertical integration
C)Horizontal integration
D)Franchising
E)Diversification

Accepted Answer

Horizontal integration involves acquiring or merging with industry competitors to achieve competitive advantages. This can lead to economies of scale, increased market power, and reduced competition. Tapered integration involves merging or acquiring with suppliers or distributors, vertical integration involves merging or acquiring with companies in the same supply chain, franchising involves licensing the use of a company's brand and business model, and diversification involves expanding into unrelated industries.

Question 8

Companies that outsource most or all of their value creation activities are often referred to as virtual corporations.

Accepted Answer

This statement is true. Virtual corporations rely heavily on outsourcing to create value for their customers and stakeholders.

Question 9

Adam's boss tells him that their company is pursuing the strategy of horizontal integration.Which of the following is evident from the scenario?
A)The company will acquire one of its suppliers.
B)The company will buy or merge with one of its rivals.
C)The company will begin to distribute its own products.
D)The company will change the organizational structure to make it more flat.
E)The company will merge with another company that belongs to a different industry.

Accepted Answer

Horizontal integration involves a company buying or merging with one of its rivals in the same industry. Therefore, the best choice is B - the company will buy or merge with one of its rivals.

Question 10

In 1999, two pharmaceutical companies that shared an equal market share decided to pool their operations to create a new firm that was known by a different name.This is an example of a(n):
A)merger.
B)acquisition.
C)procurement.
D)take over.
E)dissolution.

Accepted Answer

A merger occurs when two companies combine their operations to form a new company with a different name. This is exactly what happened in this scenario. An acquisition involves one company acquiring another company, while a takeover involves one company taking control of another company by buying a controlling share of its stock. Procurement refers to the process of purchasing goods or services, and dissolution refers to the process of ending a company's operations.

Question 11

Rachel, a new morn, is shopping for baby products.She notices that one of the manufacturers, Lucy's, is offering a wide range of products such as baby shampoo, baby lotion, and baby wipes, together, as one combined product.Which of the following concepts is illustrated in the scenario?
A)Product bundling
B)Cross-selling
C)Hostage taking
D)Strategic outsourcing
E)Parallel sourcing

Accepted Answer

The concept illustrated in the scenario is product bundling. Product bundling is the practice of offering several products for sale as one combined product. In this case, Lucy's is offering a bundle of baby products which includes baby shampoo, baby lotion, and baby wipes.

Question 12

Horizontal integration in an industry tends to:
A)increase the cost structure.
B)increase product differentiation.
C)undermine the company's competitive advantage.
D)increase rivalry within the industry.
E)reduce bargaining power over suppliers and buyers.

Accepted Answer

The answer of Horizontal integration in an industry tends to:
A)increase...

Question 13

When a company outsources its noncore activities to specialists, it looses its capabilities to differentiate its fmal products.

Accepted Answer

Outsourcing noncore activities can allow a company to focus on its core competencies and potentially enhance its ability to differentiate its final products by leveraging specialized expertise.

Question 14

A leading software company merged with its competitor to form a new company.Which of the following is likely to be the result of this merger?
A)Decreased cost per unit output
B)Decreased bargaining power over suppliers and customers
C)Increased industry rivalry
D)Decreased profitability
E)Decreased product differentiation

Accepted Answer

The merger of two companies often leads to increased economies of scale, resulting in decreased costs per unit output.

Question 15

Google bought Clever Sense, a mobile app company.This is an example of a(n):
A)parallel sourcing policy.
B)strategic outsource.
C)strategic alliance.
D)merger.
E)acquisition.

Accepted Answer

Google's purchase of Clever Sense constitutes an acquisition, as Google has purchased the entire company rather than forming a strategic alliance or a strategic outsource. It is also not an example of parallel sourcing or a merger, as neither of these terms accurately describes the relationship between the two companies.

Question 16

Strategic outsourcing is the decision to allow one or more of a company's value chain activities or functions to be performed by independent companies.

Accepted Answer

This statement accurately describes strategic outsourcing.

Question 17

All of the following are benefits of horizontal integration except:
A)Reduced risk of corning into conflict with the FTC
B)Increased product differentiation
C)Reduced industry rivalry
D)Increased bargaining power over suppliers
E)Reduced cost structure

Accepted Answer

Horizontal integration involves acquiring or merging with companies in the same industry and can lead to reduced industry rivalry, increased bargaining power over suppliers, increased product differentiation, and reduced cost structure. However, it does not necessarily reduce the risk of coming into conflict with regulatory agencies such as the Federal Trade Commission (FTC). In fact, horizontal integration can sometimes raise antitrust concerns and attract scrutiny from regulatory agencies.

Question 18

When a company decides to expand into new industries, it must:
A)develop "multibusiness model" that justifies its entry into different businesses.
B)halt marketing activities in the current industry to avoid being associated with one specific industry.
C)select a new CEO and reappoint the board of directors.
D)create one common business model for all the industries rather than each business unit. 
E)avoid talking about ways of increasing profitability in the business model.

Accepted Answer

Developing a "multibusiness model" is essential for justifying a company's entry into different industries. It explains how the company's resources, capabilities, and expertise can be leveraged to create value in these new industries. It helps to ensure that the company's expansion is strategic and financially viable.

Question 19

Horizontal integration may be thought of as:
A)moving into a new unrelated industry.
B)giving control to suppliers.
C)gaining control of distributors.
D)staying inside the industry in which the company currently operates.
E)combining functional units within the company.

Accepted Answer

Horizontal integration refers to a company expanding its operations within the same industry in which it already operates. This can be achieved through acquiring or merging with competitors, leading to increased market power and potentially higher profits. Choices A, B, and E are incorrect as they do not accurately describe the concept of horizontal integration. Choice C refers to vertical integration, which is different from horizontal integration.

Question 20

Antitrust authorities:
A)favor large companies.
B)reduce industry competition.
C)are concerned with the abuse of market power.
D)tend to raise prices of products for consumers.
E)enable the achievement of market power.

Accepted Answer

Antitrust authorities are concerned with preventing the abuse of market power by large companies that may result in reduced competition, higher prices, and other negative consequences for consumers. Their goal is to promote a competitive marketplace, not to enable the achievement of market power or favor large companies. While some antitrust actions may initially result in higher prices (for example, if a merger is blocked that would have allowed companies to raise prices together), the overall goal is to prevent companies from engaging in anti-competitive behavior that harms consumers.

Quiz 9: Corporate-Level Strategy: Horizontal Integration, Vertical Integration, and Strategic Outsourcing

Which of the following is a benefit that fmns should expect to gain from the use of horizontal integration?

The final part of the strategy formulation process is:

Competitive bidding makes suppliers reluctant to make investments that tie them closely to their trading partners.

Strategic alliance is a type oflong-terrn contract that involves one company taking over another company.

In a strategic alliance, one of the companies that's part of the agreement benefits more than the other.

Even though companies may invest in specialized assets to build competitive advantage, it is seldom necessary that suppliers do so.

is the process of acquiring or merging with industry competitors to achieve the competitive advantages.

Companies that outsource most or all of their value creation activities are often referred to as virtual corporations.

Adam's boss tells him that their company is pursuing the strategy of horizontal integration.Which of the following is evident from the scenario?

In 1999, two pharmaceutical companies that shared an equal market share decided to pool their operations to create a new firm that was known by a different name.This is an example of a(n) :

Rachel, a new morn, is shopping for baby products.She notices that one of the manufacturers, Lucy's, is offering a wide range of products such as baby shampoo, baby lotion, and baby wipes, together, as one combined product.Which of the following concepts is illustrated in the scenario?

Horizontal integration in an industry tends to:

When a company outsources its noncore activities to specialists, it looses its capabilities to differentiate its fmal products.

A leading software company merged with its competitor to form a new company.Which of the following is likely to be the result of this merger?

Google bought Clever Sense, a mobile app company.This is an example of a(n) :

Strategic outsourcing is the decision to allow one or more of a company's value chain activities or functions to be performed by independent companies.

All of the following are benefits of horizontal integration except:

When a company decides to expand into new industries, it must:

Horizontal integration may be thought of as:

Antitrust authorities: