Question 1

A(n) _____ strategy involves a firm entering a buyer's business.

Accepted Answer

Forward vertical integration involves a firm expanding its operations into its buyers' business, moving closer to the end consumer in the supply chain.

Question 2

Which of the following strategies involves a firm entering an industry that lacks any important similarities with the firm's existing industry or industries?

Accepted Answer

Unrelated diversification involves entering an industry that lacks any important similarities with the firm's existing industry or industries.

Question 3

_____ involves creating new products to serve existing markets.

Accepted Answer

Product development involves creating new products to serve existing markets.

Question 4

Alpha Computers, a firm that assembles and sells desktop computers, decides to manufacture computer parts such as mother boards and monitors. In this example, Alpha Computers uses which of the following strategies?

Accepted Answer

Backward vertical integration occurs when a company expands its role to fulfill tasks formerly completed by businesses up the supply chain, such as manufacturing its own parts.

Question 5

Which of the following best describes the strategy of backward vertical integration?

Accepted Answer

Backward vertical integration occurs when a company expands its role to fulfill tasks formerly completed by businesses up the supply chain, such as suppliers.

Question 6

Each year Jones Soda Co. introduces new holiday-themed unusual flavors such as Candy Cane, Gingerbread, Pear Tree, and Egg Nog. This is an example of which of the following strategies?

Accepted Answer

Product development involves creating new products or modifying existing ones to meet the needs of current markets, which is what Jones Soda Co. is doing by introducing new holiday-themed flavors.

Question 7

Delta Airlines announced that it was purchasing an oil refinery for $150 million and that it would spend an additional $100 million to upgrade the facility. Jet fuel is a major expense for airlines and Delta hoped that this would allow it to control costs. In this example, Delta is using which of the following strategies?

Accepted Answer

Backward vertical integration involves a company acquiring or merging with its suppliers to control its supply chain, which is what Delta is doing by purchasing an oil refinery to manage its jet fuel costs.

Question 8

Which of the following strategies can be very attractive when a firm's suppliers or buyers have too much power over the firm and are becoming increasingly profitable at the firm's expense?

Accepted Answer

Vertical integration can be attractive in this scenario as it allows a firm to gain control over its suppliers or buyers, reducing their power and capturing more of the value chain's profits.

Question 9

Which of the following is true about acquisitions?

Accepted Answer

Acquisitions usually involve a larger company purchasing a smaller one to expand its operations, market share, or capabilities.

Question 10

Disney has pursued _____________ by operating more than three hundred retail stores that sell merchandise based on Disney's characters and movies. This allows Disney to capture profits that would otherwise be enjoyed by another store.

Accepted Answer

Forward vertical integration occurs when a company expands its operations to include control over the direct distribution or supply of its products, such as Disney operating its own retail stores to sell its merchandise.

Question 11

Starbucks acquired competitor Seattle's Best Coffee - which had a presence in Subway restaurants - in order to target a more working-class audience without diluting the Starbucks brand. What is this an example of?

Accepted Answer

This is an example of horizontal integration, where a company acquires another company in the same industry at the same level of the supply chain to expand its market reach and customer base.

Question 12

When pursuing a(n) _____ strategy, a firm gets involved in new portions of the value chain.

Accepted Answer

Vertical integration involves a firm expanding its operations into different stages of the production process or value chain, such as acquiring suppliers or distributors.

Question 13

Forward vertical integration involves:

Accepted Answer

Forward vertical integration involves a company expanding its operations to include control over its buyers or distribution channels, essentially entering a buyer's business.

Question 14

Smart Systems Inc. is a firm that manufactures and sells desktop computers to the consumer and business market segments. After extensive market research and portfolio planning, the firm decides to launch a new line of mobile phones. In this example, Digi-Smart Systems uses which of the following strategies?

Accepted Answer

Related diversification occurs when a company expands its product lines or markets by adding new products that are related to its existing business. In this case, Smart Systems Inc. is expanding from desktop computers to mobile phones, which are related in the technology and electronics sector.

Question 15

Which of the following best describes the strategy of diversification?

Accepted Answer

Diversification involves a firm expanding into new value chains, which means entering different industries or markets that are distinct from its current operations.

Question 16

_____ can be useful for neutralizing the effect of powerful buyers.

Accepted Answer

Forward vertical integration can be useful for neutralizing the effect of powerful buyers by allowing a company to gain control over the distribution or retail aspects of its products, thereby reducing dependency on external buyers.

Question 17

Starlight Inc., a women's apparel and fashion accessories manufacturing firm, launches a new line of maternity wear and children's clothing to be sold at its existing outlets. In this example, Starlight Inc. uses which of the following strategies?

Accepted Answer

Starlight Inc. is introducing new products (maternity wear and children's clothing) to its existing market, which is an example of a product development strategy.

Question 18

As smoking becomes less and less attractive in many countries, lighter firm Zippo has faced a 50 percent decline in sales levels. They have begun to offer lanterns, hand warmers, outdoor tools, cooking accessories, fragrances, and watches in hopes of leveraging their "rugged, durable, made in America, iconic" image. Which of the following strategies are Zippo executives using?

Accepted Answer

Zippo is using related diversification by expanding its product line to include items that are related to its core brand image but are not lighters, in order to leverage its existing brand reputation and appeal to a broader market.

Question 19

Firms using _____ strategies are those that enter entirely new industries.

Accepted Answer

Diversification strategies involve entering new industries, which is different from focusing on existing markets or products.

Question 20

Which of the following is true about mergers?

Accepted Answer

A merger typically involves the joining of two similarly sized companies into one, as opposed to an acquisition where a larger company purchases a smaller one.

Quiz 8: Selecting Corporate-Level Strategies