Globus Test 3 PERFECTLY SOLVED 2024
Corporate Strategy -CORRECT ANS-the decisions that senior management makes and the goal-directed
actions it takes to gain and sustain competitive advantage in several industries and markets
simultaneously
-vertical integration: industry value chain describes the transformation of raw materials into finished
goods and services along distinct vertical changes
-diversification: what range of products and services should the company offer?
-geographic scope: where should the company compete geographically in terms of regional, national, or
international markets?
Why firms need to grow? -CORRECT ANS-1. increase profits
2. lower costs
3. increase market power
4. reduce risk
5. motivate management
transaction cost economics -CORRECT ANS-a theoretical framework in strategic management to explain
and predict the boundaries of the firm, which is central to formulating a corporate strategy that is more
likely to lead to competitive advantage
transaction costs -CORRECT ANS-all internal and external costs associated with an economic exchange,
whether within a firm or in markets
external transaction costs -CORRECT ANS-costs of searching for a firm or an individual with whom to
contract, and then negotiating, monitoring, and enforcing the contract
internal transaction costs -CORRECT ANS-costs pertaining to organizing an economic exchange within a
hierarchy; also called administrative costs
, Backward vertical integration -CORRECT ANS-changes in an industry value chain that involve moving
ownership of activities upstream to the originating (inputs) point of the value chain
Forward vertical integration -CORRECT ANS-changes in an industry value chain that involve moving
ownership of activities closer to the end (customer) point of the value chain
Benefits of Vertical Integration -CORRECT ANS--lowering costs
-improving quality
-facilitating scheduling and planning
-facilitating investments in specialized assets
-securing critical supplies and distribution channels
Risks of Vertical Integration -CORRECT ANS-increasing costs, reducing quality, reducing flexibility,
increasing the potential for legal repercussions
taper integration -CORRECT ANS-a way of orchestrating value activities in which a firm is backwardly
integrated but also relies on outside market firms for some of its supplies, and/or is forwardly integrated
but also relies on outside market firms for some of its distribution
strategic outsourcing -CORRECT ANS-moving one or more internal value chain activities outside the
firm's boundaries to other firms in the industry value chain
4 main types of business diversification -CORRECT ANS-single business: low level of diversification.
derives more than 95 percent of its revenues from 1 business.
dominant business: derive between 70-95 percent of its revenues from a single business but it peruses
at least one other business activity
related diversification: corporate strategy in which a firm derives less than 70 percent of its revenues
from a single business activity and obtains revenues from other lines of business that are linked to the
primary business activity
Corporate Strategy -CORRECT ANS-the decisions that senior management makes and the goal-directed
actions it takes to gain and sustain competitive advantage in several industries and markets
simultaneously
-vertical integration: industry value chain describes the transformation of raw materials into finished
goods and services along distinct vertical changes
-diversification: what range of products and services should the company offer?
-geographic scope: where should the company compete geographically in terms of regional, national, or
international markets?
Why firms need to grow? -CORRECT ANS-1. increase profits
2. lower costs
3. increase market power
4. reduce risk
5. motivate management
transaction cost economics -CORRECT ANS-a theoretical framework in strategic management to explain
and predict the boundaries of the firm, which is central to formulating a corporate strategy that is more
likely to lead to competitive advantage
transaction costs -CORRECT ANS-all internal and external costs associated with an economic exchange,
whether within a firm or in markets
external transaction costs -CORRECT ANS-costs of searching for a firm or an individual with whom to
contract, and then negotiating, monitoring, and enforcing the contract
internal transaction costs -CORRECT ANS-costs pertaining to organizing an economic exchange within a
hierarchy; also called administrative costs
, Backward vertical integration -CORRECT ANS-changes in an industry value chain that involve moving
ownership of activities upstream to the originating (inputs) point of the value chain
Forward vertical integration -CORRECT ANS-changes in an industry value chain that involve moving
ownership of activities closer to the end (customer) point of the value chain
Benefits of Vertical Integration -CORRECT ANS--lowering costs
-improving quality
-facilitating scheduling and planning
-facilitating investments in specialized assets
-securing critical supplies and distribution channels
Risks of Vertical Integration -CORRECT ANS-increasing costs, reducing quality, reducing flexibility,
increasing the potential for legal repercussions
taper integration -CORRECT ANS-a way of orchestrating value activities in which a firm is backwardly
integrated but also relies on outside market firms for some of its supplies, and/or is forwardly integrated
but also relies on outside market firms for some of its distribution
strategic outsourcing -CORRECT ANS-moving one or more internal value chain activities outside the
firm's boundaries to other firms in the industry value chain
4 main types of business diversification -CORRECT ANS-single business: low level of diversification.
derives more than 95 percent of its revenues from 1 business.
dominant business: derive between 70-95 percent of its revenues from a single business but it peruses
at least one other business activity
related diversification: corporate strategy in which a firm derives less than 70 percent of its revenues
from a single business activity and obtains revenues from other lines of business that are linked to the
primary business activity
