Globus Test 3 exam with 100% correct answers

Corporate Strategy the decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously -vertical integration: industry value chain describes the transformation of raw materials into finished goods and services along distinct vertical changes -diversification: what range of products and services should the company offer? -geographic scope: where should the company compete geographically in terms of regional, national, or international markets? Why firms need to grow? 1. increase profits 2. lower costs 3. increase market power 4. reduce risk 5. motivate management transaction cost economics a theoretical framework in strategic management to explain and predict the boundaries of the firm, which is central to formulating a corporate strategy that is more likely to lead to competitive advantage transaction costs all internal and external costs associated with an economic exchange, whether within a firm or in markets external transaction costs costs of searching for a firm or an individual with whom to contract, and then negotiating, monitoring, and enforcing the contract internal transaction costs costs pertaining to organizing an economic exchange within a hierarchy; also called administrative costs Backward vertical integration changes in an industry value chain that involve moving ownership of activities upstream to the originating (inputs) point of the value chain Forward vertical integration changes in an industry value chain that involve moving ownership of activities closer to the end (customer) point of the value chain Benefits of Vertical Integration -lowering costs -improving quality -facilitating scheduling and planning -facilitating investments in specialized assets -securing critical supplies and distribution channels Risks of Vertical Integration increasing costs, reducing quality, reducing flexibility, increasing the potential for legal repercussions taper integration a way of orchestrating value activities in which a firm is backwardly integrated but also relies on outside market firms for some of its supplies, and/or is forwardly integrated but also relies on outside market firms for some of its distribution strategic outsourcing moving one or more internal value chain activities outside the firm's