WPC 480 Final Exam Questions and Answers

WPC 480 Final Exam Questions and
Answers

Corporate iiStrategy ii- iiAnswers ii-The iidecisions ii& iiactions iitaken iito iigain ii& iisustain
iicompetitive iiadvantage iiin iiseveral iiindustries iiand iimarkets iisimultaneously


What iidoes iicorporate iistrategy iiaddress? ii- iiAnswers ii-Where iito iicompete iion ii3
iidimensions:


Industry iivalue iichain: iivertical iiintegration

Products ii& iiservices: iidiversification

Geography: iiregional, iinational, iior iiglobal iimarkets

Vertical iiIntegration ii- iiAnswers ii-The iiprocess iiin iiwhich iiseveral iisteps iiin iithe
iiproduction iiand/or iidistribution iiof iia iiproduct iior iiservice iiare iicontrolled iiand iiowned iiby
iia iisingle iicompany iior iientity, iiin iiorder iito iiincrease iithat iicompany's iior iientity's iipower
iiin iithe iimarketplace


Forward iiIntegration ii- iiAnswers ii-Integrating iisteps iithat iiare iifurther iiforward iiin iithe
iiprocess


Ex. iiconcentrate iiproducers iiintegrating iibottling

Backward iiIntegration ii- iiAnswers ii-Integrating iisteps iithat iiare iifurther iiback iiin iithe
iiproduction iiprocess ii


Ex. iiHermes ii- iigetting iia iicrocodile iifarm iito iisupply iiown iileather

Boundaries iiof iithe iifirm ii- iiAnswers ii-Why iidoes iia iifirm iiexist iiand iito iiwhat iiextent
iishould iithe iifirm iiexpand?


Transaction iiCost iiEconomics ii- iiAnswers ii-Helps iiexplain iiand iipredict iiboundaries iiof
iithe iifirm


Transaction iicosts ii- iiAnswers ii-the iicosts iiassociated iiwith iiactivities iithat iiare iinot
iidirectly iiproductive iibut iiare iiengaged iiin iionly iias iia iiconsequence iiof iithe iineed iito
iicoordinate iiexchange iiamong iithe iiparties iiof iia iitransaction


Internal iitransaction iicosts ii- iiAnswers ii-Recruiting iiand iiretaining iiemployees

,Paying iisalaries iiand iibenefits

Setting iiup iia iishop iifloor

Providing iioffice iispace iiand iicomputers, iietc.

External iiTransaction iiCosts ii- iiAnswers ii-Searching iifor iia iifirm iiindividual iito iicontract
iiwith


Bargaining, iinegotiating, iihaggling iicost

Monitoring, iimeasuring, iisupervising, iienforcing iior iipolicing iiperformance

External iitransaction iicosts iiarise iiprimarily iias iia iiresult iiof: ii- iiAnswers ii-Opportunism

Asset iiSpecificity

Opportunism ii- iiAnswers ii-Willingness iiof iiat iileast iisome iipeople iito iitake iiadvantage iiof
iiothers


Dishonesty

Threat iiof iiOpportunism ii- iiAnswers ii-Greatest iiwhen iithere iiis iian iiasset iispecificity
iiproblem


(i.e. iitransaction iispecific iiinvestment)

Asset iiSpecificity ii- iiAnswers ii-Unique iiassets iiwith iihigh iiopportunity iicost ii- iisignificantly
iimore iivalue iiin iitheir iiintended iius iithan iiin iitheir iinext-best iiuse ii


Ex. iisite iispecificity, iiphysical iiasset iispecificity, iihuman iiasset iispecificity

Asset iiSpecificity iiExamples ii- iiAnswers ii-Oil iirefinery ii& iioil iipipeline

Auto iiparts ii& iiauto iiassembly

Benefits iiof iivertical iiintegration: ii- iiAnswers ii-Reduces iiopportunism

Facilitates iiinvestments iiin iispecialized iiassets

Facilitates iischeduling iiand iiplanning

Secures iicritical iisupplies iiand iidistribution iichannels

Leverage iiR&Cs

, Uses iifiats iiand iiauthority

Risks iiof iiVertical iiIntegration ii- iiAnswers ii-Integration iicosts

Increase iiin iithe iipotential iifor iilegal iirepercussions

Reduction iiin iiflexibility

VI ii- iiIntegration iiCosts ii- iiAnswers ii-Integration iicos iimust iibe iiless iithan iiopportunism
iicost


Firm iivs. iiMarket ii(Make iior iibuy) ii- iiAnswers ii-Firm-Advantage

Firm-Disadvantage

Market-Advantage

Market-Disadvantage

Firm-Advantage ii- iiAnswers ii-Command iiand iicontrol ii- iifiat, iihierarchical iilines iiof
iiauthority




Coordination

Transaction-Specific iiInvestments ii

Community iiof iiknowledge

Firm-Disadvantage ii- iiAnswers ii-Administrative iiCosts

Low-powered iiincentives

Principal-agent iiproblems

Initial iiInvestment ii

Less iiflexibility

Market-Advantages ii- iiAnswers ii-High-powered iiincentives

Flexibility iiespecially iiunder iihigh iiuncertainty

Utilizing iimarket iispecialty ii(i.e. iipick iithe iiwinner; iiprice iimechanism