Question 1

The downside risks associated with investing in a strategic alliance are unknown but fixed.

Accepted Answer

The downside risks associated with investing in a strategic alliance are not fixed and can vary depending on various factors such as market conditions, performance of partners, changes in regulations, etc.

Question 2

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

Accepted Answer

Outsourcing allows firms to delegate non-core activities to external entities that have expertise in those areas, resulting in cost savings and allowing the firm to focus on activities that are central to their competitive advantage.

Question 3

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

Accepted Answer

By vertically integrating, a firm can have greater control over its supply chain and eliminate uncertainties regarding the availability, quality, and cost of raw materials or finished products. This can give it an advantage over competitors who may still be reliant on external sources and facing similar uncertainties.

Question 4

Research suggests that, in general, vertically integrating is more flexible than not vertically integrating.

Accepted Answer

The answer of Research suggests that, in general, vertically integrating...

Question 5

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.

Accepted Answer

The answer of Once a firm has vertically integrated it...

Question 6

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

Accepted Answer

The answer of A firm's ability to conceive of and...

Question 7

If a firm has capabilities that are valuable and rare, then vertically integrating into businesses that exploit these capabilities can enable the firm to gain at least a temporary competitive advantage.

Accepted Answer

This statement is true. If a firm has valuable and rare capabilities, and vertical integration allows the firm to exploit these capabilities, it can lead to a temporary competitive advantage. However, it is important to note that vertical integration does not always guarantee a competitive advantage and can also result in increased costs and decreased efficiency.

Question 8

Strategic alliances are the major substitute for vertical integration.

Accepted Answer

Strategic alliances involve two companies collaborating and working together to achieve a common goal, such as developing a new product or entering a new market. This allows each company to leverage their strengths and resources without fully merging or acquiring the other. Vertical integration, on the other hand, involves a company owning and controlling multiple stages of the supply chain, from production to distribution. Strategic alliances are a substitute for vertical integration because they offer some of the benefits of integration, such as increased efficiency and control, without the high costs and risks of full integration.

Question 9

From a CEO's perspective, coordinating functional specialists to implement a vertical integration strategy rarely involves conflict resolution.

Accepted Answer

Coordinating functional specialists to implement a vertical integration strategy can often involve conflict resolution, as different areas of the organization may have differing views on the best approach or may be protective of their own functions. The CEO may need to mediate these conflicts to ensure a successful integration strategy.

Question 10

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.

Accepted Answer

Budgets in a U-form organization are typically set for each functional department. As a result, functional managers may prioritize meeting the budget targets over long-term goals or investment in new initiatives. This can lead to a focus on short-term, measurable results and underinvestment in longer-term goals that may not provide immediate financial benefits.

Question 11

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

Accepted Answer

Flexibility allows a firm to adapt and change in response to changing circumstances, which is especially valuable in uncertain decision-making settings where the outcomes of different options are less certain. In more certain decision-making settings, a firm may not need to be as flexible since it may have more predictable outcomes to rely on.

Question 12

Numerous conflicts can arise among functional managers in a vertically integrated U-form organization.

Accepted Answer

Functional managers in a vertically integrated U-form organization may have different priorities and objectives that could lead to conflicts and disagreements. They may compete for resources or have conflicting opinions on how to achieve organizational goals, which can cause tension and hinder collaboration.

Question 13

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

Accepted Answer

In an uncertain decision-making setting, future values cannot be known with certainty. This can lead to risk and uncertainty in investments and decision-making.

Question 14

While the functional or U-form structure is used to implement a cost-leadership or product-differentiation strategy, a matrix structure is most often used to implement a vertical integration strategy.

Accepted Answer

A matrix structure is a type of organizational structure where employees report to multiple bosses or managers, typically a functional manager and a product or project manager. It is often used in complex organizations that need to balance conflicting priorities, such as those implementing a diversification or geographic expansion strategy. Vertical integration, on the other hand, involves the acquisition or development of suppliers or distributors in the same industry or value chain, and does not necessarily require a matrix structure.

Question 15

Flexibility is low when the cost of changing strategic choices is low.

Accepted Answer

Flexibility is high when the cost of changing strategic choices is low. This allows for easy adaptation to changes in the business environment.

Question 16

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.

Accepted Answer

A flexibility-based approach suggests that vertical integration should be avoided in uncertain decision-making settings, and instead firms should form strategic alliances to enter the activity.

Question 17

A firm's vertical integration strategy is rare when few competing firms are able to create value by vertically integrating in the same way.

Accepted Answer

If many competing firms are able to create value by vertically integrating in the same way, then the strategy is not rare.

Question 18

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

Accepted Answer

A firm's vertical integration strategy can also be rare if the costs of such integration outweigh the benefits, or if there are legal or regulatory barriers preventing other firms from vertically integrating.

Question 19

Flexibility is always valuable.

Accepted Answer

The answer of Flexibility is always valuable....

Question 20

Strategizing is one of the most important control mechanisms available to CEOs in vertically integrated U-form organizations.

Accepted Answer

The answer of Strategizing is one of the most important...

Quiz 6: Vertical Integration