BUS 475 FINAL EXAM LATEST ACTUAL EXAM
Corporate Strategy - ANSWER: As firms grow, they tend to expand their business
activities through seeking new markets
Transaction cost economics (TCE) - ANSWER: Helps explain and predict boundaries
of the firm based on incurred costs
- allows us to determine which activities a firm should pursue in-house ("make")
versus which goods and services to obtain externally ("buy")
Transaction Costs - ANSWER: Costs associated with an economic exchange
Firms Vs. Markets - ANSWER: When firms are more efficient than the market, they
should vertically integrate
Example: cannabis industry
Firm (in-house) — Advantages - ANSWER: Investment in specialized assets can be
facilitated
- Command and control
Firms ( in-house)- Disadvantages - ANSWER: High administrative costs
Loss of flexibility
Markets- Advantages - ANSWER: High administrative costs
Loss of flexibility
Markets- Disadvantages - ANSWER: High search costs
Incomplete contracting
Strategic alliances - ANSWER: Voluntary arrangements between firms that involve
sharing of knowledge, resources, and capabilities
Vertical Integration - ANSWER: raw materials into finished goods and services along
distinct vertical stages
Vertical Integration Benefits - ANSWER: Secures critical supplies
Increases operational efficiencies
3 Types of asset specificity - ANSWER: Site specificity: co-location requirements
Physical asset specificity: unique physical & engineering properties
Human asset specificity: investments made in human capital
4 types of business diversification - ANSWER: Classification scheme
Corporate Strategy - ANSWER: As firms grow, they tend to expand their business
activities through seeking new markets
Transaction cost economics (TCE) - ANSWER: Helps explain and predict boundaries
of the firm based on incurred costs
- allows us to determine which activities a firm should pursue in-house ("make")
versus which goods and services to obtain externally ("buy")
Transaction Costs - ANSWER: Costs associated with an economic exchange
Firms Vs. Markets - ANSWER: When firms are more efficient than the market, they
should vertically integrate
Example: cannabis industry
Firm (in-house) — Advantages - ANSWER: Investment in specialized assets can be
facilitated
- Command and control
Firms ( in-house)- Disadvantages - ANSWER: High administrative costs
Loss of flexibility
Markets- Advantages - ANSWER: High administrative costs
Loss of flexibility
Markets- Disadvantages - ANSWER: High search costs
Incomplete contracting
Strategic alliances - ANSWER: Voluntary arrangements between firms that involve
sharing of knowledge, resources, and capabilities
Vertical Integration - ANSWER: raw materials into finished goods and services along
distinct vertical stages
Vertical Integration Benefits - ANSWER: Secures critical supplies
Increases operational efficiencies
3 Types of asset specificity - ANSWER: Site specificity: co-location requirements
Physical asset specificity: unique physical & engineering properties
Human asset specificity: investments made in human capital
4 types of business diversification - ANSWER: Classification scheme
