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Exam 6: Vertical Integration

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Question 21

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A firm's vertical integration strategy can only be rare when it is the only firm that is able to vertically integrate efficiently.

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Question 22

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According to ________ of when vertical integration creates value,vertical integration is valuable when it reduces threats from a firm's suppliers or buyer due to any transaction-specific investments a firm has made.

A) firm capability explanations
B) opportunity-based explanations
C) flexibility-based explanations
D) opportunism-based explanations

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Question 23

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Discuss the opportunism-based explanation of vertical integration value creation and identify when,under this explanation,firms should vertically integrate.In your answer be sure to clearly define opportunism and the role that transaction-specific investments play in the opportunism-based explanation.

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.

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.

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

Once a firm has vertically integrated it has committed its organizational structure,its management controls,and its compensation policies to a particular vertically integrated way of doing business and it has enhanced its flexibility.

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

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

Firm-specific investments are a type of ________ investments.

A firm may be able to gain an advantage from vertically integrating when it resolves some uncertainty it faces sooner than its competition.

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

When Apple,Inc.opened retail stores to sell its computers and iPods,this was an example of

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

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

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

What type of compensation approach goes best with the flexibility explanation of vertical integration?

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

If one of the suppliers that Digipics purchases its components from purposefully delivered a batch of its product that was substandard but did not inform Digipics of this,this would be an example of

A(n) ________ approach to vertical integration suggests that rather than vertically integrating into a business activity whose value is highly uncertain firms should not vertically integrate and instead should form a strategic alliance to manage this exchange.