WPC 480 - Final Exam Questions With
Complete Solutions
Vertical Integration - Make/Buy? (Definition & Chart) - A function of transaction costs -
all the internal & external costs associated with an economic exchange
- When costs of pursuing an activity in-house are less than costs of purchasing the activity, firms
should choose vertical integration
Diversification (Definition) An increase in the variety of products & services a firm offers
or markets and geographic regions in which it competes
Diversification - Single Business - a single business leverages its competencies
- revenues from primary business: >95%
Diversification - Dominant Business - Dominant and minor businesses share
competencies
- revenues from primary businesses: 70%-95%
Related Diversification - Related-Constrained - Businesses generally share competencies
- Revenues from primary business: <70%
, WPC 480 - Final Exam Questions With
Complete Solutions
Related Diversification - Related-linked - some businesses share competencies
- Revenues from primary business: <70%
Related diversification - unrelated diversification (conglomerate) - Businesses share few,
it any, competencies
- Revenues from primary business: <70%
build-borrow-or-buy framework (chart & definition) Aids strategic leaders in deciding
whether to pursue internal development (build), enter a contractual arrangement/strategic
alliance (borrow), or acquire new resources, capabilities, and competencies (buy)
Strategic Alliance - Definition & Benefits - a voluntary arrangement between firms
- Benefits: used to strengthen competitive position, complement value chain/access new assets,
learn new capabilities, enter new market
non-equity strategic alliance (Governance mechanism, types of knowledge exchanged, pros &
cons) - Governance mechanism - Contract
Complete Solutions
Vertical Integration - Make/Buy? (Definition & Chart) - A function of transaction costs -
all the internal & external costs associated with an economic exchange
- When costs of pursuing an activity in-house are less than costs of purchasing the activity, firms
should choose vertical integration
Diversification (Definition) An increase in the variety of products & services a firm offers
or markets and geographic regions in which it competes
Diversification - Single Business - a single business leverages its competencies
- revenues from primary business: >95%
Diversification - Dominant Business - Dominant and minor businesses share
competencies
- revenues from primary businesses: 70%-95%
Related Diversification - Related-Constrained - Businesses generally share competencies
- Revenues from primary business: <70%
, WPC 480 - Final Exam Questions With
Complete Solutions
Related Diversification - Related-linked - some businesses share competencies
- Revenues from primary business: <70%
Related diversification - unrelated diversification (conglomerate) - Businesses share few,
it any, competencies
- Revenues from primary business: <70%
build-borrow-or-buy framework (chart & definition) Aids strategic leaders in deciding
whether to pursue internal development (build), enter a contractual arrangement/strategic
alliance (borrow), or acquire new resources, capabilities, and competencies (buy)
Strategic Alliance - Definition & Benefits - a voluntary arrangement between firms
- Benefits: used to strengthen competitive position, complement value chain/access new assets,
learn new capabilities, enter new market
non-equity strategic alliance (Governance mechanism, types of knowledge exchanged, pros &
cons) - Governance mechanism - Contract
