Bus 401 Final || All Solutions are Accurate.

Bus 401 Final || All Solutions are Accurate.
Business strategy is a firm's theory of how to gain competitive advantage by operating in several
businesses simultaneously. correct answers False


Decisions about whether or not to vertically integrate often determined whether or not a firm is
operating in a single business or industry or multiple businesses or industries. correct answers
True


A firm's level of vertical integration is the number of steps in its value chain that the firm
accomplishes within its boundaries. correct answers True


More vertically integrated firms accomplish fewer stages of the value chain within their
boundaries than less vertically integrated firms. correct answers False


A firm engages in backward vertical integration when it incorporates more stages of the value
chain within its boundaries and those stages bring it closer to gaining access to raw materials.
correct answers True


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 answers False


When companies staffed and operated their own call centers in the United States, they were
engaging in backward vertical integration, but when they started using independent companies in
India to staff and operate these centers, they were more vertically integrated. correct answers
False


Opportunism exists when a firm is unfairly exploited in an exchange. correct answers True


If one of a firm's exchange partners behaves opportunistically, this reduces the economic value of
the firm. correct answers True

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


The threat of opportunism is the least when a party to an exchange has made transaction-specific
investments. correct answers False


A transaction-specific investment is any investment in an exchange that has significantly more
value in the current exchange than it does in alternative exchanges. correct answers True


Transaction-specific investments make parties to an exchange vulnerable to opportunism, and
vertical integration solves this vulnerability problem. correct answers True


Firms should avoid vertically integrating in those businesses where they possess valuable, rare,
and costly-to-imitate resources and capabilities. correct answers False


If a firm engages in vertical integration into a business activity where it does not possess any of
the valuable, rare, or costly-to-imitate resources it needs to gain a competitive advantage, it may
find itself at a competitive disadvantage to the extent that some firms already have competitive
advantages in these business activities. correct answers True


If a supplier is overly reliant on a single customer, this supplier can be at risk of opportunism on
the part of the customer. correct answers True


Flexibility refers to how costly it is for a firm to alter its strategic and organizational decisions.
correct answers True


Flexibility is always valuable. correct answers False


Flexibility is only valuable when the decision-making setting a firm is facing is uncertain. correct
answers True

, A decision-making setting is uncertain when the future value of an exchange cannot be known
when investments in that exchange are being made. correct answers True


A flexibility-based approach to vertical integration suggests that when the decision-making
setting regarding a business activity is highly uncertain, firms should form a strategic alliance to
enter this activity instead of vertically integrating. correct answers True


Outsourcing can help firms reduce costs and focus their efforts on those business functions that
are central to their competitive advantage. correct answers True


Vertical integration is a type of
A) business strategy.
B) generic strategy.
C) differentiation strategy.
D) corporate strategy. correct answers D. corporate strategy


The number of steps in a firm's value chain that it accomplishes within its boundaries describes
the firm's level of
A) product differentiation.
B) diversification.
C) vertical integration.
D) competitive dynamics. correct answers C. Vertical integration


When Apple, Inc. opened retail stores to sell its computers and iPods, this was an example of
A) forward vertical integration.
B) backward vertical integration.
C) forward horizontal integration.
D) backward horizontal integration. correct answers A. Forward vertical integration