Globus Test 3 questions and answers with
solutions 2025
Corporate Strategy - ANSWER 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? - ANSWER 1. increase profits
2. lower costs
3. increase market power
4. reduce risk
5. motivate management
transaction cost economics - ANSWER 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 - ANSWER all internal and external costs associated with an economic
exchange, whether within a firm or in markets
, external transaction costs - ANSWER costs of searching for a firm or an individual with whom to
contract, and then negotiating, monitoring, and enforcing the contract
internal transaction costs - ANSWER costs pertaining to organizing an economic exchange within
a hierarchy; also called administrative costs
Backward vertical integration - ANSWER 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 - ANSWER 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 - ANSWER -lowering costs
-improving quality
-facilitating scheduling and planning
-facilitating investments in specialized assets
-securing critical supplies and distribution channels
Risks of Vertical Integration - ANSWER increasing costs, reducing quality, reducing flexibility,
increasing the potential for legal repercussions
taper integration - ANSWER 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 - ANSWER moving one or more internal value chain activities outside the
firm's boundaries to other firms in the industry value chain
solutions 2025
Corporate Strategy - ANSWER 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? - ANSWER 1. increase profits
2. lower costs
3. increase market power
4. reduce risk
5. motivate management
transaction cost economics - ANSWER 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 - ANSWER all internal and external costs associated with an economic
exchange, whether within a firm or in markets
, external transaction costs - ANSWER costs of searching for a firm or an individual with whom to
contract, and then negotiating, monitoring, and enforcing the contract
internal transaction costs - ANSWER costs pertaining to organizing an economic exchange within
a hierarchy; also called administrative costs
Backward vertical integration - ANSWER 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 - ANSWER 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 - ANSWER -lowering costs
-improving quality
-facilitating scheduling and planning
-facilitating investments in specialized assets
-securing critical supplies and distribution channels
Risks of Vertical Integration - ANSWER increasing costs, reducing quality, reducing flexibility,
increasing the potential for legal repercussions
taper integration - ANSWER 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 - ANSWER moving one or more internal value chain activities outside the
firm's boundaries to other firms in the industry value chain
