WPC 480 - Final Exam Questions With Complete Solutions

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