Question 1

Outsourcing occurs when a firm:

Accepted Answer

Outsourcing occurs when a firm hires another firm to perform value creation activities. This allows the firm to focus on its core competencies and reduce costs by taking advantage of economies of scale and the specialized expertise of the outsourcing partner.

Question 2

John's surfboard shop has a long-term relationship with two surfboard makers.John is usiog:

Accepted Answer

Parallel sourcing refers to maintaining relationships with multiple suppliers for the same product, which is what John is doing by having a long-term relationship with two surfboard makers.

Question 3

Credible commitments refer to:

Accepted Answer

Credible commitments refer to promises or commitments made by a company that are viewed as believable by the other party or parties involved. These commitments support the development of long-term relationships between companies, where each party can trust the other to fulfill their commitments over time.

Question 4

An automobile company enters into a long-term contract with two suppliers for the same automobile tool.This is to ensure the company is protected in the event of one of the suppliers adopting an uncooperative attitude.Which of the following concepts is illustrated in this scenario?

Accepted Answer

The concept illustrated in this scenario is parallel sourcing. It involves entering into contracts with multiple suppliers for the same product or service to mitigate the risk of supply chain disruptions or uncooperative suppliers.

Question 5

When technology in an industry is changing rapidly, a company pursuing a strategy of vertical integration may fmd itself:

Accepted Answer

Pursuing a strategy of vertical integration means that the company is bringing activities in-house that were previously done by suppliers. However, if technology in the industry is changing rapidly, the company may find itself locked into an old, inefficient technology as it may not have the flexibility to quickly adopt new technology from suppliers. This can make it difficult to compete with companies that are able to quickly adopt the latest technology.

Question 6

Under which of the following circumstances is vertical integration considered hazardous?

Accepted Answer

The answer of Under which of the following circumstances is...

Question 7

To build trust io a cooperative relationship, both fmns can:

Accepted Answer

Making mutual investments in specialized assets, such as equipment or facilities, creates a level of interdependence between the two companies and incentivizes them to work cooperatively towards shared goals. This can help build trust in the relationship as both companies have a stake in each other's success. The other options listed do not necessarily promote cooperation or trust-building in the same way.

Question 8

Companies invest in specialized assets because these assets allow them to:

Accepted Answer

D  E  Specialized assets can help companies lower costs through efficiency (A), develop customized products that meet specific customer needs (D), and charge premium prices due to the unique value or differentiation they offer (E).

Question 9

Long-term agreements between two or more companies to jointly develop new products or processes that benefit all companies that are a part of the agreement are known as:

Accepted Answer

Long-term agreements between two or more companies to jointly develop new products or processes that benefit all companies that are a part of the agreement are known as strategic alliances. The other choices, such as outsourcing, joint venture, horizontal and vertical integration, refer to different forms of collaboration or integration between companies, but not necessarily with the joint goal of developing new products or processes.

Question 10

For a company based in frnal assembly, moving into retail and distribution means:

Accepted Answer

Moving into retail and distribution is an example of forward integration because the company is integrating forward towards the end consumer.

Question 11

Vertical integration can be disadvantageous when:

Accepted Answer

Vertical integration can be disadvantageous when industry technology is changing rapidly because investing in costly fixed assets to produce goods or services in-house can quickly become obsolete as new technologies emerge. This can result in wasted resources and decreased competitiveness.

Question 12

Which of the following is not a benefit of vertical integration?

Accepted Answer

The answer of Which of the following is not a...

Question 13

SparklingLeaves is one of the major suppliers of automobile tools to StanMotors, a leading automobile company. Many of the tools are customized to meet the specific needs of StanMotors and hence have little other value.In return, StanMotors has agreed to make SparklingLeaves its sole supplier of automobile equipment for a period of 15 years.This scenario illustrates:

Accepted Answer

This scenario illustrates credible commitment, as StanMotors has made a long-term agreement to only purchase their automobile equipment from SparklingLeaves in exchange for customized tools. This commitment provides assurance to SparklingLeaves that they will have a stable customer for a significant period of time.

Question 14

Which of the following problems is associated with the strategy of vertical integration?

Accepted Answer

Vertical integration involves owning and controlling different stages of the supply chain, which can lead to vulnerability to unpredictable demand. This is because changes in demand or supply at one stage of the supply chain can affect the entire chain, leading to excess inventory or stockouts.

Question 15

Long-term contracts:

Accepted Answer

Long-term contracts are a low-cost alternative to vertical integration when it is possible to build cooperative relationships with suppliers. This allows firms to benefit from economies of scale and reduce transaction costs while maintaining flexibility and avoiding the risks associated with vertical integration. Option A is incorrect because long-term contracts are not necessarily preferable when there is a minimal need for cooperation. Option B is incorrect because vertical integration involves owning the supply chain rather than entering into contracts with suppliers. Option C is incorrect because long-term contracts may result in higher prices if the supplier has significant bargaining power. Option D is incorrect because vertical integration involves integrating operations rather than entering into contracts.

Question 16

A company pursuing a strategy of vertical integration may expand its operations:

Accepted Answer

Backward integration involves expanding into an industry that produces inputs for the company's products. This allows the company to have more control over its supply chain and potentially reduce costs. The other choices do not reflect the strategy of vertical integration.

Question 17

The price that one division of a company charges another division for its products, which are the inputs the other division requires to manufacture its own products is known as:

Accepted Answer

The described pricing strategy is known as transfer pricing. It is used when one division of a company provides products or services to another division, and a price is set for these inputs. This price can impact the profitability of both divisions and the overall performance of the company, making transfer pricing an important management issue.

Question 18

When there is a minimal need for close long-term cooperation between a company and its suppliers, which of the following strategies is the most appropriate?

Accepted Answer

Competitive bidding is the most appropriate strategy when there is a minimal need for close long-term cooperation between a company and its suppliers. This strategy involves inviting bids from multiple suppliers and selecting the most cost-effective one for each particular project or purchase. It is suitable for situations where the company has a relatively low volume of purchases or where the products or services required are standardized and readily available in the market.

Question 19

Vertical disintegration is said to occur when:

Accepted Answer

The answer of Vertical disintegration is said to occur when:
...

Question 20

A strategy of vertical integration may be a risky strategy for a company to pursue when demand is:

Accepted Answer

Vertical integration involves a company expanding its operations by owning and controlling its suppliers or distributors. This can be a risky strategy when demand is unpredictable because it requires a significant investment in infrastructure and resources that may not be fully utilized if demand fluctuates. In such situations, it may be more prudent to maintain flexibility by outsourcing production or distribution to third parties.

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