WPC 480 Chae Final UPDATED ACTUAL
Questions and CORRECT Answers
What is Corporate strategy? - CORRECT ANSWER - Actions to sustain/gain comp. adv.
in several industries and markets
Where does corporate strategy compete? - CORRECT ANSWER - 1)Industry value chain:
vertical integration
2)Product and services: diversification
3)Geography (regional, national, global mkts)
What is Vertical integration? - CORRECT ANSWER - Process where several steps in
production are controlled and owned by a single company
Forward Integration - CORRECT ANSWER - ex) pepsi concentrate controls bottlers
Backwards integration - CORRECT ANSWER - ex) manufacturer controls design
process/area
Transaction Costs - CORRECT ANSWER - costs associated with economic change
Internal vs external
employees pay, benefit, office space vs. contract, supervising performance, negotiating
Opportunism - CORRECT ANSWER - Willingly taking adv of others (dishonesty)
threat of opp. is highest when paired with asset specificity problem
,Asset specificity - CORRECT ANSWER - Unique assets with high opportunity cost,
most value in first use than next best use.
Should a firm make or buy? - CORRECT ANSWER - C in house < C market= vertical
integrate
Make > Buy =vertical integrate, no = outsource
Which is an example of internal trans. cost?
a. pertaining to setting up a floor
b. searching for suitable manufacturer
c. negotiating prices with business consultant
d. outsourcing papyroll maintenance
e. backward vertical integration - CORRECT ANSWER -A
T/F Threat of opportunism is the least when a party to an exchange has made transaction-specific
investments - CORRECT ANSWER -F
T/F Flexibility is most valuable when the decision-making setting faced by a firm is uncertain. -
CORRECT ANSWER -T
T/F When depending largely on an input that is valueable, rare and costly to imitate, it is optimal
to carry out the exchange on the open market - CORRECT ANSWER -F
T/F MAKE> BUY = vertically integrate - CORRECT ANSWER -T
Levels of strategy - CORRECT ANSWER - 1. Corporate (where to compete)
2. Business (how to compete)
3. Functional (how to execute)
, Diversification - CORRECT ANSWER - Range of products and service a firm should
offer
Types of diversification - CORRECT ANSWER - -Single business. 95, A
-Dominant business. 70-95, AB
-Related constrained. <70 ABC
-Related Linked. <70 ABCD
-Unrelated <70, A B C (separated)
Benefits of diversification - CORRECT ANSWER - Reduce costs and increase value,
economies of scale and exploit economies of scope to create synergy across business
Operational Economies of scope - CORRECT ANSWER - Shared activities, leveraging
core competencies
Financial economies of scope - CORRECT ANSWER - Internal capital markets,
restructuring
BCG Matrix - CORRECT ANSWER - growth x mkt share: ?, star, dog, cow
Corporate Diversification and Firm performance - CORRECT ANSWER - H/L = Lower
performance
Moderate= higher firm performance
Rationale behind related diversification is to...
a. limit learning-curve and experience-curve effect
b. benefit from economies of scale and scope
Questions and CORRECT Answers
What is Corporate strategy? - CORRECT ANSWER - Actions to sustain/gain comp. adv.
in several industries and markets
Where does corporate strategy compete? - CORRECT ANSWER - 1)Industry value chain:
vertical integration
2)Product and services: diversification
3)Geography (regional, national, global mkts)
What is Vertical integration? - CORRECT ANSWER - Process where several steps in
production are controlled and owned by a single company
Forward Integration - CORRECT ANSWER - ex) pepsi concentrate controls bottlers
Backwards integration - CORRECT ANSWER - ex) manufacturer controls design
process/area
Transaction Costs - CORRECT ANSWER - costs associated with economic change
Internal vs external
employees pay, benefit, office space vs. contract, supervising performance, negotiating
Opportunism - CORRECT ANSWER - Willingly taking adv of others (dishonesty)
threat of opp. is highest when paired with asset specificity problem
,Asset specificity - CORRECT ANSWER - Unique assets with high opportunity cost,
most value in first use than next best use.
Should a firm make or buy? - CORRECT ANSWER - C in house < C market= vertical
integrate
Make > Buy =vertical integrate, no = outsource
Which is an example of internal trans. cost?
a. pertaining to setting up a floor
b. searching for suitable manufacturer
c. negotiating prices with business consultant
d. outsourcing papyroll maintenance
e. backward vertical integration - CORRECT ANSWER -A
T/F Threat of opportunism is the least when a party to an exchange has made transaction-specific
investments - CORRECT ANSWER -F
T/F Flexibility is most valuable when the decision-making setting faced by a firm is uncertain. -
CORRECT ANSWER -T
T/F When depending largely on an input that is valueable, rare and costly to imitate, it is optimal
to carry out the exchange on the open market - CORRECT ANSWER -F
T/F MAKE> BUY = vertically integrate - CORRECT ANSWER -T
Levels of strategy - CORRECT ANSWER - 1. Corporate (where to compete)
2. Business (how to compete)
3. Functional (how to execute)
, Diversification - CORRECT ANSWER - Range of products and service a firm should
offer
Types of diversification - CORRECT ANSWER - -Single business. 95, A
-Dominant business. 70-95, AB
-Related constrained. <70 ABC
-Related Linked. <70 ABCD
-Unrelated <70, A B C (separated)
Benefits of diversification - CORRECT ANSWER - Reduce costs and increase value,
economies of scale and exploit economies of scope to create synergy across business
Operational Economies of scope - CORRECT ANSWER - Shared activities, leveraging
core competencies
Financial economies of scope - CORRECT ANSWER - Internal capital markets,
restructuring
BCG Matrix - CORRECT ANSWER - growth x mkt share: ?, star, dog, cow
Corporate Diversification and Firm performance - CORRECT ANSWER - H/L = Lower
performance
Moderate= higher firm performance
Rationale behind related diversification is to...
a. limit learning-curve and experience-curve effect
b. benefit from economies of scale and scope
