Question 1

If Wal-Mart were to purchase a factory to make socks and it planned to sell these socks in its stores, this would be an example of forward vertical integration.

Accepted Answer

A) True 
 B)False

Question 2

Flexibility is always valuable.

Accepted Answer

A) True 
 B)False

Question 3

________ are when employees are given the right, but not the obligation, to purchase stock at predetermined prices.

Accepted Answer

A)   Flexibility grants
B)   Stock grants
C)   Stock options
D)   Grant optionsE) None of the above
F) B) and D)

Question 4

The use of budgets in a vertically integrated U-form organization can lead functional managers to overemphasize short-term behavior that is easy to measure and underemphasize longer-term behavior that is more difficult to measure.

Accepted Answer

A) True 
 B)False

Question 5

Discuss the flexibility-based explanation of vertical integration. In discussing this explanation be sure to define flexibility, the role of uncertainty in this explanation, and identify when, under this explanation, firms should engage in vertical integration.

Accepted Answer

The flexibility-based explanation of ver...

Question 6

If Brenda Thompson, Tom Mix's supervisor, wanted to use a budgeting process to help evaluate Tom's performance but wanted to ensure that using a budget did not encourage Tom to focus on short-term behaviors at the expense of long-term results, she should

Accepted Answer

A)   develop the budget herself using realistic goals based on the economic reality facing Tom's function and use both quantitative and qualitative evaluations of the performance of Tom's function and then give the budget to Tom to follow.
B)   work with Tom in an open and participative process to develop the budget based on the most optimistic scenario possible and use both quantitative and qualitative evaluations of the performance of Tom's function.
C)   develop the budget herself based on the most pessimistic scenario possible and use both quantitative and qualitative evaluations of the performance of Tom's function and then give the budget to Tom to follow.
D)   work with Tom in an open and participative process to develop the budget based on the economic reality facing Tom's function and use both quantitative and qualitative evaluations of the performance of Tom's function.E) B) and C)
F) A) and D)

Question 7

Firms should only bring market exchanges within their boundaries when the cost of vertical integration is more than the cost of opportunism.

Accepted Answer

A) True 
 B)False

Question 8

Define vertical integration and differentiate between forward vertical integration and backward vertical integration.

Accepted Answer

Vertical integration is a corporate stra...

Question 9

Discuss the role of the budgeting process as a control mechanism in vertically integrated U-form organizations, the potential unintended negative consequence budgets can have, and three things CEOs can do to counter this potential consequence.

Accepted Answer

Budgeting is one of the most important c...

Question 10

The ________ logic suggests that compensation that has a fixed and known downside risk and significant upside potential is important for firms implementing vertical integration strategies.

Accepted Answer

A)   opportunism
B)   strategic
C)   capabilities
D)   flexibility.E) B) and D)
F) None of the above

Question 11

TerraLoc's development of the new battery technology is likely to

Accepted Answer

A)   reduce the rarity of TerraLoc's vertical integration strategy since competitors can purchase batteries from other sources.
B)   increase the rarity of TerraLoc's vertical integration strategy since TerraLoc has reduced uncertainties related to increased battery life in its products.
C)   increase the imitability of TerraLoc's vertical integration strategy since competitors can purchase traditional batteries from other sources.
D)   decrease the imitability of TerraLoc's vertical integration strategy since it increases competitors' flexibility.E) B) and D)
F) B) and C)

Question 12

A decision-making setting is ________ when the future of an exchange cannot be known when investments in that exchange are being made.

Accepted Answer

A)   uncertain
B)   opportunistic
C)   flexible
D)   dynamicE) B) and C)
F) A) and B)

Question 13

A(n)  ________ is any investment in an exchange that has significantly more value in the current exchange than it does in alternative exchanges.

Accepted Answer

A)   opportunity-specific investment
B)   transaction-specific investment
C)   competition-specific investment
D)   opportunistic investmentE) A) and B)
F) B) and C)

Question 14

Which committee in a U-form organization meets weekly and reviews the performance of the firm on a weekly basis and typically consists of a CEO and two or three functional senior managers?

Accepted Answer

A)   Top management team
B)   Executive committee
C)   Operations committee
D)   Functional committeeE) None of the above
F) A) and B)

Question 15

Firms should not vertically integrate into business activities where they do not possess the resources necessary to gain competitive advantages.

Accepted Answer

A) True 
 B)False

Question 16

If Digipics were to begin selling the cameras it assembled directly to customers through a website operated by the company, this would be an example of

Accepted Answer

A)   backward vertical integration.
B)   a strategic alliance.
C)   forward vertical integration.
D)   opportunism.E) A) and B)
F) B) and D)

Question 17

The number of steps in a firm's value chain that it accomplishes within its boundaries describes the firm's level of

Accepted Answer

A)   product differentiation.
B)   diversification.
C)   vertical integration.
D)   competitive dynamics.E) A) and D)
F) A) and C)

Question 18

A firm's ability to conceive of and implement vertical integration strategies tends to be highly susceptible to direct duplication.

Accepted Answer

A) True 
 B)False

Question 19

If Dell computers were to open its own factory to manufacture the LCD televisions it sells at its online store, this would be an example of

Accepted Answer

A)   forward vertical integration.
B)   product differentiation.
C)   forward horizontal integration.
D)   backward vertical integration.E) None of the above
F) C) and D)

Question 20

The downside risks associated with investing in a strategic alliance are unknown but fixed.

Accepted Answer

A) True 
 B)False

Exam 6: Vertical Integration

If Dell computers were to open its own factory to manufacture the LCD televisions it sells at its online store, this would be an example of

Correct AnswerverifiedShow Answer

A firm's ability to conceive of and implement vertical integration strategies tends to be highly susceptible to direct duplication.

Correct AnswerverifiedShow Answer

Define vertical integration and differentiate between forward vertical integration and backward vertical integration.

Correct AnswerverifiedVertical integration is a corporate stra...View AnswerShow Answer

If Brenda Thompson, Tom Mix's supervisor, wanted to use a budgeting process to help evaluate Tom's performance but wanted to ensure that using a budget did not encourage Tom to focus on short-term behaviors at the expense of long-term results, she should

Correct AnswerverifiedShow Answer

Firms should only bring market exchanges within their boundaries when the cost of vertical integration is more than the cost of opportunism.

Correct AnswerverifiedShow Answer

The number of steps in a firm's value chain that it accomplishes within its boundaries describes the firm's level of

Correct AnswerverifiedShow Answer

The use of budgets in a vertically integrated U-form organization can lead functional managers to overemphasize short-term behavior that is easy to measure and underemphasize longer-term behavior that is more difficult to measure.

Correct AnswerverifiedShow Answer

A decision-making setting is ________ when the future of an exchange cannot be known when investments in that exchange are being made.

Correct AnswerverifiedShow Answer

The downside risks associated with investing in a strategic alliance are unknown but fixed.

Correct AnswerverifiedShow Answer

If Wal-Mart were to purchase a factory to make socks and it planned to sell these socks in its stores, this would be an example of forward vertical integration.

Correct AnswerverifiedShow Answer

________ are when employees are given the right, but not the obligation, to purchase stock at predetermined prices.

Correct AnswerverifiedShow Answer

The ________ logic suggests that compensation that has a fixed and known downside risk and significant upside potential is important for firms implementing vertical integration strategies.

Correct AnswerverifiedShow Answer

Discuss the role of the budgeting process as a control mechanism in vertically integrated U-form organizations, the potential unintended negative consequence budgets can have, and three things CEOs can do to counter this potential consequence.

Correct AnswerverifiedBudgeting is one of the most important c...View AnswerShow Answer

Flexibility is always valuable.

Correct AnswerverifiedShow Answer

Discuss the flexibility-based explanation of vertical integration. In discussing this explanation be sure to define flexibility, the role of uncertainty in this explanation, and identify when, under this explanation, firms should engage in vertical integration.

Correct AnswerverifiedThe flexibility-based explanation of ver...View AnswerShow Answer

If Digipics were to begin selling the cameras it assembled directly to customers through a website operated by the company, this would be an example of

Correct AnswerverifiedShow Answer

Which committee in a U-form organization meets weekly and reviews the performance of the firm on a weekly basis and typically consists of a CEO and two or three functional senior managers?

Correct AnswerverifiedShow Answer

A(n) ________ is any investment in an exchange that has significantly more value in the current exchange than it does in alternative exchanges.

Correct AnswerverifiedShow Answer

TerraLoc's development of the new battery technology is likely to

Correct AnswerverifiedShow Answer

Firms should not vertically integrate into business activities where they do not possess the resources necessary to gain competitive advantages.

Correct AnswerverifiedShow Answer

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Vertical integration is a corporate stra...
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Budgeting is one of the most important c...
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The flexibility-based explanation of ver...
View Answer

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