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Exam 8: Corporate Strategy: Vertical Integration and Diversification

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Question 31

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Stellar Products Inc.is a U.S.-based consumer electronics company.It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide.Which of the following alternatives to integration does this best illustrate?

A) venture capitalism
B) franchising
C) joint venture
D) parent-subsidiary relationship

E) A) and D)
F) All of the above

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Question 32

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In 2009,ExxonMobil bought XTO Energy,a natural gas company,for $31 billion.XTO Energy is known for its core competency to extract natural gas from unconventional places such as shale rock-the type of deposits currently being exploited in the United States.ExxonMobil hopes to leverage its core competency in the exploration and commercialization of oil into natural gas extraction.Based on this example,ExxonMobil is engaging in

A) unrelated-linked diversification.
B) unrelated-constrained diversification.
C) related-linked diversification.
D) related-constrained diversification.

E) A) and C)
F) A) and D)

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Question 33

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A drawback of short-term contracting as an alternative to making a component in-house is that

Chao is in an interview for a sales job that requires no experience.He is trying to portray himself as a highly enthusiastic,energetic person with high-level communication and interpersonal skills.The interviewer is convinced that Chao should be hired as a salesperson in the company.However,in his resume,Chao had not mentioned his previous work experience as he was fired from that job because he used illegal drugs.Which of the following does this scenario best illustrate?

WJ Group Inc.,a large multinational conglomerate,had begun to experience declining revenues over the years.The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies.Thus,a few of the company's key businesses like energy,telecommunications,and automobiles were centralized,giving the top management more control over them.Also,relatively newer businesses like beverages and food processing were divested.In this scenario,WJ Group is involved in

_____ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.

When approaching a bank for a loan,the borrower has better knowledge than the lender about his or her own ability to repay the loan without defaulting.What is this situation referred to as?

_____ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.

A(n) _____ is best used to depict the transformation of raw materials into finished goods and services along distinct vertical stages.

In the context of the Boston Consulting Group (BCG) growth-share matrix,if one of the strategic business units of a conglomerate is categorized under dogs,the management should

GreenCure Pharma Inc.wanted its research partner,an R&D company,to develop a cancer vaccine.However,the project required huge capital investments,and its research partner was not ready to solely face the risks involved.Thus,to gain its partner's confidence and to prove its involvement,GreenCure Pharma invested $100 million in the project.This investment made by GreenCure Pharma will result in a

Silver Weave Inc.,an apparel company,operates through a business model in which individuals can buy the rights to set up Silver Weave stores and sell the company's merchandise in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month.The owners of the stores have to stock the collection approved from the company's headquarters and also maintain consistent customer service as expected in its flagship store.Which of the following alternatives to integration does this best illustrate?

The solar-powered car division of a large automobile company has been experiencing negative cash flows though the market growth for such cars is predicted to be high.If the company invests further resources into this division,it can increase its relative market share in the future.However,if due to technological changes the car cannot create sufficient consumer demand,then the division can prove to be unprofitable.In the Boston Consulting Group (BCG) growth-share matrix,the solar-powered car division will be categorized under

Which of the following is an example of an internal transaction cost?

ElectraSync Inc.,a large consumer electronics company,has divided each product in its portfolio into a separate strategic business unit (SBU) .The desktop SBU has been experiencing drastic decline in its cash flow,and its market share has also reduced to an insignificant 10 percent.This has been attributed to the low growth in the desktop market after the arrival of tablet computers and laptops.In the context of the Boston Consulting Group (BCG) growth-share matrix,the desktop SBU will be categorized under

Caring Ketchup Inc.makes organic ketchup.To promote its products,this firm decided to make bottles in the shape of tomatoes.To accomplish this,Caring Ketchup worked with its bottle manufacture to create a set of unique molds for its bottles.Which of the following specialized assets does this example demonstrate?

The 3-D television division of a large consumer electronics company has been recognized as a question mark.The company's LCD television division has been categorized under dogs.Which of the following statements will hold well in this scenario?

In 2007,Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools.This allowed its customers to either extend their existing CRM offering or build completely new types of software.This is an example of

While KFC focuses on international markets,its competitor,Chick-fil-A,focuses on the domestic U.S.market.What is the reason behind this strategic difference?

_____ is best described as the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully.