AEM 2601 Prelim 2 || All Answers are Valid.
Firms exist in situations where the administrative costs of coordinating economic activity are less
than the transaction costs of organizing such activity across markets. correct answers TRUE
Walmart has its IT system vertically integrated. Why would they not consider outsourcing it?
correct answers Because their distribution system is unique and thus easier to coordinate if the IT
is in-house.
Why might Zara benefit from vertically integrating at least some of their clothes factories?
correct answers Because they would be able to quickly coordinate to change manufacturing to
accommodate new designs
The reason that most food processing firms do not backward integrate into farming is that:
(a) Most food products are supplied through competitive markets where transaction costs are low
(b) Farming and food processing are strategically dissimilar business
(a) and (b)
Neither (a) nor (b) correct answers (a) and (b)
Which of these are motives for diversification?
(a) growth
(b) risk spreading
(c) value creation correct answers (c) value creation
At the time the case is set, is TPS a core capability or is it operational effectiveness for Toyota?
correct answers Core capability
When a firm is diversifying through acquiring a firm in another industry, the critical issue is
whether the (net) synergies that can be realized will offset the acquisition premium paid. correct
answers TRUE
, Which best represents the relationship between diversification and performance? correct answers
graph with symmetric downside U
Company growth is a motive for diversification that is definitely going to create shareholder
value. correct answers FALSE
The attractiveness test for entering driverless cars will be the same for Google, General Motors,
and Mazda. correct answers TRUE
Responsive CSR is more likely to improve CFP because it will get more PR. correct answers
FALSE
Because CSR can be used to attract employees to accept lower wages, CSR should primarily be a
tool to help firms achieve cost leadership advantage. correct answers FALSE
Which of the following could be relevant for determining corporate social performance? (a)
Managerial preference, (b) social pressure and (c) profit. correct answers (a), (b), and (c)
IKEA is not concerned about its CSR image since it pursues a cost leadership advantage so does
not need a brand to increase willingness-to-pay. correct answers FALSE
The long run sustainability of competitive advantage requires managing effectively in the
nonmarket/CSR environment. correct answers TRUE
Pick the one best answer. Which of the following is an example of how firms compete on price?
(a) invest in employee training to provide excellent customer service
(b) outsource production to lower wage countries
(c) design an improved product that performs better than competitors
Firms exist in situations where the administrative costs of coordinating economic activity are less
than the transaction costs of organizing such activity across markets. correct answers TRUE
Walmart has its IT system vertically integrated. Why would they not consider outsourcing it?
correct answers Because their distribution system is unique and thus easier to coordinate if the IT
is in-house.
Why might Zara benefit from vertically integrating at least some of their clothes factories?
correct answers Because they would be able to quickly coordinate to change manufacturing to
accommodate new designs
The reason that most food processing firms do not backward integrate into farming is that:
(a) Most food products are supplied through competitive markets where transaction costs are low
(b) Farming and food processing are strategically dissimilar business
(a) and (b)
Neither (a) nor (b) correct answers (a) and (b)
Which of these are motives for diversification?
(a) growth
(b) risk spreading
(c) value creation correct answers (c) value creation
At the time the case is set, is TPS a core capability or is it operational effectiveness for Toyota?
correct answers Core capability
When a firm is diversifying through acquiring a firm in another industry, the critical issue is
whether the (net) synergies that can be realized will offset the acquisition premium paid. correct
answers TRUE
, Which best represents the relationship between diversification and performance? correct answers
graph with symmetric downside U
Company growth is a motive for diversification that is definitely going to create shareholder
value. correct answers FALSE
The attractiveness test for entering driverless cars will be the same for Google, General Motors,
and Mazda. correct answers TRUE
Responsive CSR is more likely to improve CFP because it will get more PR. correct answers
FALSE
Because CSR can be used to attract employees to accept lower wages, CSR should primarily be a
tool to help firms achieve cost leadership advantage. correct answers FALSE
Which of the following could be relevant for determining corporate social performance? (a)
Managerial preference, (b) social pressure and (c) profit. correct answers (a), (b), and (c)
IKEA is not concerned about its CSR image since it pursues a cost leadership advantage so does
not need a brand to increase willingness-to-pay. correct answers FALSE
The long run sustainability of competitive advantage requires managing effectively in the
nonmarket/CSR environment. correct answers TRUE
Pick the one best answer. Which of the following is an example of how firms compete on price?
(a) invest in employee training to provide excellent customer service
(b) outsource production to lower wage countries
(c) design an improved product that performs better than competitors
