The Maroon Apparel company controls the weaving, dyeing, cutting, and sewing of its merchandise. Apart from these activities, it also manufactures buttons, zips, buckles, and other accessories for its apparel. This is done in order to exercise tight control over its manufacturing processes and to reduce production costs. This strategy of the company is known as _____.
A. vertical integration
B. unrelated diversification
C. horizontal integration
D. mass customization
E. conglomerate diversification
102.Which of the following is a recent trend among international businesses regarding make-or-buy decisions?
A. Foreign facilities are considered nothing more than low-cost production facilities.
B. Research and design operations are restricted to home-country production facilities.
C. Manufacturing facilities are being based in each major national market.
D. Firms are avoiding time-based competition with each other.
E. Outsourcing decisions are expanding to embrace the production of service activities.
103.A(n) _____ refers to an asset designed to perform a specific task, whose value is significantly reduced in its next-best use.
A. fixed asset
B. specialized asset
C. intangible asset
D. liquid asset
E. deferred asset
104.Which of the following statements is true about specialized assets?
A. The value of a specialized asset significantly increases in its next-best use.
B. When one firm must invest in specialized assets to supply another, mutual dependency is created.
C. When substantial investments in specialized assets are required, firms prefer to contract it out to a supplier.
D. A specialized asset is a flexible manufacturing technology that can be put to multiple uses.
E. Using a specialized asset allows firms to switch their orders easily between suppliers.
105.Which of the following is an argument that supports vertical integration?
A. It makes planning, coordination, and scheduling of adjacent processes easy.
B. It facilitates the transfer of proprietary product technology.
C. It increases the number of subunits in an organization.
D. It eliminates the need to invest in specialized assets.
E. It prevents a firm from maintaining flexibility.
106.A firm should make a component internally rather than contracting it out to a supplier when:
A. substantial investments in specialized assets can be avoided.
B. the firm uses proprietary product technology that helps in gaining competitive advantage.
C. it wants to reduce the number of subunits in the organization.
D. the optimal location for manufacturing a product is beset by political risks.
E. different tax regimes and exchange rate movements increase the complexity of transfer pricing decisions.
107.If a firm possesses proprietary product technology, the best option for that firm would be to:
A. manufacture the product in-house so that it does not lose its competitive advantage.
B. outsource the production activities to independent suppliers in order to realize economies of scale.
C. merge with competitors to reduce investments on technology.
D. share the technology to make the industry more competitive.
E. transfer the technology to less developed countries.
108.Which of the following refer(s) to skills of a corporation that become more valuable over time through learning?
A. Global learning
B. Accrued interests
C. Dynamic capabilities
D. Learning effects
E. Universal needs
109.Which of the following is an advantage for a firm that buys component parts from independent suppliers?
A. It makes planning, coordination, and scheduling of adjacent processes easier.
B. It protects a firms proprietary production technology.
C. It facilitates investments in highly specialized assets.
D. It allows a firm to maintain its flexibility by switching orders between suppliers.
E. It provides the opportunity to build dynamic capabilities in production activities.
110.Which of the following is a disadvantage of vertical integration?
A. It fails to protect a firm's proprietary product technology.
B. Firms lose out on the opportunities to build dynamic capabilities.
C. It is difficult to determine appropriate prices for goods transferred to subunits within a firm.
D. It fails to facilitate investments in highly specialized assets.
E. It does not allow a firm to exercise tight control over its production process.
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