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_____ is best described as moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain.


A) Strategic outsourcing
B) Reverse engineering
C) Forward integration
D) Horizontal integration

E) B) and D)
F) A) and D)

Correct Answer

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TL & Co.is following a related-linked diversification strategy,and Soar Inc.is following a related-constrained diversification strategy.How do the two firms differ from each other?


A) Soar Inc. generates 70 percent of its revenues from its primary business, while TL & Co. generates only 10 percent of its revenues from its primary business.
B) Soar Inc. pursues a backward diversification strategy, while TL & Co. pursues a forward diversification strategy.
C) TL & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc.
D) TL & Co. pursues a differentiation strategy, and Soar Inc. pursues a cost-leadership strategy, to gain a competitive advantage.

E) A) and B)
F) A) and C)

Correct Answer

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A corporation's star SBUs will


A) hold a high market share in a fast-growing market.
B) experience low and unstable earnings in a fast-growing market.
C) hold a small market share in a low-growth market.
D) compete in a low-growth market but hold considerable market share.

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

Correct Answer

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Grace Apparel Inc.has decided to procure fabrics required for its garments from external suppliers instead of maintaining its own dyeing and weaving facilities.How will this decision affect the firm?


A) The firm will be protected against the principal-agent problem.
B) The firm's administrative costs will be low because of necessary bureaucracy.
C) The firm will have more flexibility in purchasing and comparing prices of goods and services.
D) The firm will have high-powered incentives, such as hourly wages and salaries.

E) A) and B)
F) None of the above

Correct Answer

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Amazon.com has decided to enter the college bookstore market.The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia,such as logo sweaters and baseball hats.This development shows Amazon's relentless pursuit of


A) geographic diversification.
B) product diversification.
C) vertical integration.
D) horizontal integration.

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

Correct Answer

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Which of the following is a drawback of vertical integration?


A) It increases the difficulty of securing critical supplies.
B) It impedes scheduling and planning.
C) It increases the potential of legal repercussions.
D) It impedes investments in special assets.

E) None of the above
F) A) and B)

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Which of the following statements is true of taper integration?


A) It is the most integrated alternative to performing an activity within one's own corporate family.
B) It refers to a situation in which firms narrow their focus on downstream value chain activities and ignore the upstream value chain activities.
C) It exposes in-house suppliers and distributors to market competition to make performance comparisons possible.
D) It does not rely on outside-market firms for its supplies.

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

Correct Answer

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In the early 1990s,Gatorade dominated the market for sports drinks,a segment in which it had been the original innovator.For decades,Coca-Cola had been a leader in marketing,bottling,and distributing soft drinks.However these drinks did not include a sports drink.Soon after Gatorade appeared,Coca-Cola developed and marketed its own sports drink,Powerade.In this example,Coca-Cola


A) built new core competencies to protect and extend its current market position.
B) built new core competencies to create and compete in markets of the future.
C) leveraged core competencies to improve current market position.
D) redeployed and recombined core competencies to compete in markets of the future.

E) B) and C)
F) A) and C)

Correct Answer

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Decisions relating to the range of products and services a firm will offer determine the firm's


A) level of diversification.
B) geographic scope.
C) vertical integration.
D) absorptive capacity.

E) A) and B)
F) A) and C)

Correct Answer

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Which of the following is true of the parent-subsidiary relationship?


A) The ability to create a community of knowledge is low.
B) The parent firm has no control and command over the subsidiary.
C) The transaction costs that arise are frequently due to transfer prices.
D) The parent firm will lack specialization and division of labor.

E) A) and B)
F) A) and C)

Correct Answer

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