Management 405 - Strategic Management » Fall 2022 » Quiz 4

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Question #1
Vertical integration can strengthen a company's differentiation business-level strategy and competitive advantage.
A.   False
B.   True
Question #2
Vertical integration can raise costs if, over time, a company's leaders continue to purchase inputs from company-owned suppliers even when independent suppliers can supply the same inputs at lower cost.
A.   True
B.   False
Question #3
The term bureaucratic costs refers to costs associated with the creation and maintenance of the administrative function in a company.
A.   False
B.   True
Question #4
Diversification is the process of entering new industries, distinct from a company’s core or original industry, to make new kinds of products that can be sold profitably to customers in these new industries.
A.   False
B.   True
Question #5
If a company generates free cash flow, that money technically belongs to shareholders.
A.   True
B.   False
Question #6
Competitive bidding makes suppliers reluctant to make investments that tie them closely to their trading partners.
A.   True
B.   False
Question #7
When a company decides to expand into new industries, it must:
A.   halt marketing activities in the current industry to avoid being associated with one specific industry.
B.   create one common business model for all the industries rather than each business unit.
C.   avoid talking about ways of increasing profitability in the business model.
D.   select a new CEO and reappoint the board of directors.
E.   develop a "multibusiness model" that justifies its entry into different businesses.
Question #8
For a company concentrating on final assembly, adding retail and distribution into its value chain will require:
A.   backward integration.
B.   unrelated diversification.
C.   related diversification.
D.   forward integration.
E.   taper integration.
Question #9
Outsourcing occurs when a firm:
A.   buys one of its rivals.
B.   hires another firm to perform value creation activities.
C.   merges with one of its suppliers.
D.   enters into a joint venture with a rival.
E.   enters into a strategic alliance with multiple firms.
Question #10
Company leaders that base their diversification strategy on transferring competencies tend to acquire new businesses that are _________ to their existing business activities.
A.   related
B.   unrelated
C.   identical
D.   opposed
E.   not comparable
Question #11
A strategy based on diversification may fail to add value because companies:
A.   seek to achieve a low-cost position instead of differentiation.
B.   make acquisitions rather than develop new technologies on their own.
C.   diversify into areas in which they have some knowledge and miss out on profitable opportunities in other areas.
D.   incur bureaucratic costs that exceed the value created by the strategy.
E.   seek to achieve differentiation instead of low cost.
Question #12
Acquisitions often fail because of:
A.   slowness in establishing significant market presence.
B.   poor commercialization.
C.   large-scale entry.
D.   pre-acquisition screening that increases the time it takes to enter a market.
E.   differences in corporate culture.

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