Question 1

Oracle Corp., based in Reno, Nevada, has purchased several other companies to become the world's largest maker of database software. This strategy is known as the strategy of acquisition.

Accepted Answer

The statement correctly describes Oracle's strategy of acquiring other companies to become the world's largest maker of database software.

Question 2

Horizontal integration can lead to low cost advantages but rarely to differentiation advantages.

Accepted Answer

Horizontal integration can lead to differentiation advantages when the combination of companies creates a unique and diverse product mix that sets them apart from competitors. This can increase their ability to attract and retain customers based on the diversity and uniqueness of their offerings.

Question 3

Unfortunately, horizontal integration can not be accomplished by acquisitions or mergers.

Accepted Answer

Horizontal integration can be accomplished through acquisitions or mergers where companies in the same industry merge or one company acquires another company that produces similar goods or services. Therefore, the statement is false.

Question 4

Horizontal integration can help lower costs when it allows a company to reduce the duplication of resources.

Accepted Answer

Horizontal integration involves combining two or more companies operating in the same industry or market. This can lead to economies of scale and the elimination of duplicate resources, such as facilities, staff, and equipment. By reducing these costs, a company can achieve greater efficiencies and improve its profitability.

Question 5

Transfer pricing refers to when a company is taken advantage of by another company it does business with after it has made an investment in expensive specialized assets to better meet the needs of the other company.

Accepted Answer

Transfer pricing refers to the pricing of goods, services, and intangibles between related parties, such as subsidiaries within a multinational company, rather than the scenario described.

Question 6

A company should first choose a corporate-level strategy, and then look at how changes will affect a company's current business model and strategies.

Accepted Answer

The answer of A company should first choose a corporate-level...

Question 7

Vertical integration can strengthen a company's differentiation business-level strategy and competitive advantage.

Accepted Answer

Vertical integration involves acquiring or owning businesses that are along the same supply chain as the company. This allows for greater control over the production process and can lead to a more differentiated product or service. With stronger control over the supply chain, companies can reduce costs and improve the quality of the final product, leading to a competitive advantage. Therefore, vertical integration can strengthen a company's differentiation business-level strategy and competitive advantage.

Question 8

Horizontal integration almost always increases rivalry in an industry.

Accepted Answer

Horizontal integration can reduce rivalry by consolidating competitors, but it can also increase rivalry if it leads to a more competitive market structure or if the merged entity aggressively competes with remaining firms.

Question 9

When a bank offers home mortgages and credit cards to its checking account customers, it is using horizontal integration strategy.

Accepted Answer

Horizontal integration involves acquiring or merging with competitors in the same industry, while offering different products like mortgages and credit cards to existing customers is a cross-selling strategy.

Question 10

An advantage of horizontal integration is that it can lower a company's cost structure by creating increasing economies of scale.

Accepted Answer

Horizontal integration allows companies to increase their market share and reduce competition by acquiring or merging with other companies in the same industry, resulting in increased economies of scale and lower cost structures.

Question 11

Vertical integration is undertaken to support the competitive position of a company's core business.

Accepted Answer

Vertical integration is a strategy where a company expands its operations in the supply chain by acquiring or merging with companies at different stages of the production process. This is done to ensure that the company has more control over its supply chain, reduce dependence on suppliers and distributors, and improve efficiency. The primary objective of vertical integration is to support the competitive position of a company's core business. Therefore, the given statement is true.

Question 12

The term bureaucratic costs refers to costs associated with the creation and maintenance of the administrative function in a company.

Accepted Answer

The answer of The term bureaucratic costs refers to costs...

Question 13

A merger occurs when one company uses its capital resources, such as stock, debt, or cash, to purchase another company.

Accepted Answer

A merger involves two companies combining to form a new entity, whereas the scenario described is an acquisition, where one company purchases another.

Question 14

When a company stays inside one industry, the problems of sustaining a successful business model and strategies over time can be difficult because of changing conditions in the environment.

Accepted Answer

Staying within one industry may limit the company's ability to adapt to changing conditions in the environment, which can make sustaining a successful business model and strategies over time difficult.

Question 15

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.

Accepted Answer

Vertical integration can lead to a lack of competition, which can result in a company overpaying for inputs. This problem is more likely to arise if a company continues to purchase inputs from company-owned suppliers rather than seeking out the most cost-efficient options. Ultimately, this can lead to higher costs for the company.

Question 16

Vertical integration can be risky when demand is unpredictable because it is hard to manage the volume or flow of products along the value-added chain.

Accepted Answer

Vertical integration involves owning and controlling multiple stages of the supply chain, which can lead to higher risk if demand is unpredictable. It becomes difficult to manage the volume or flow of products along the value-added chain, resulting in higher costs or excess inventory.

Question 17

Product bundling occurs when a firm offers a range of products that are sold together at a single price.

Accepted Answer

This statement accurately defines what product bundling is.

Question 18

Horizontal integration allows companies to obtain bargaining power over suppliers or buyers and increase their profitability at the expense of suppliers or buyers.

Accepted Answer

Horizontal integration allows companies to expand their operations into the same level of the supply chain, which can give them greater leverage in negotiations with suppliers or buyers. This can lead to increased profitability for the company, but may come at the expense of suppliers or buyers who may have less bargaining power in the relationship.

Question 19

Tina's Technologies is expanding its operations backward into an industry that produces inputs for the company's products. Tina's Technologies is utilizing horizontal integration.

Accepted Answer

Horizontal integration involves merging with or acquiring similar companies operating in the same industry. In this case, Tina's Technologies is expanding backwards into a different industry, which would be an example of vertical integration.

Question 20

Managers use corporate-level strategy to identify which industries a company should compete in to maximize long-run profitability.

Accepted Answer

Corporate-level strategy involves decisions related to which industries a company should compete in, among other things. Its goal is to maximize long-term profitability, among other things.

Quiz 9: Corporate-Level Strategy: Horizontal Integration, Vertical Integration, and Strategic Outsourcing