Week 10 Review

When automobile magazines face competition from automobile blogs on the web, which of the following forces in Michael Porter’s five forces model primarily gets stronger?

• the emergence of entry barriers

• the bargaining power of suppliers

• the availability of complements

• the threat of substitutes

Fast-food chain Taco Trio operates through a business model in which individuals can buy the rights to set up Taco Trio restaurants and sell the company’s food in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the individual restaurants have to offer a menu approved at Taco Trio headquarters, use the same interior color scheme and layout as the flagship restaurant, and maintain high-level customer service. Which of the following alternatives to integration does this best illustrate?

• franchising

• crowdsourcing

• bootstrapping

• credit rationing

Hector, owner of Hector’s Trucking, wants to figure out if his business should diversify its range of services to gain an advantage over competitors. Business consultants have advised Hector to focus on the key question of where to compete. He would therefore be considering which of the following?

• his business strategy

• his transaction costs strategy

• his external transaction costs strategy

   

• his functional strategy

Nguyen Autos currently sources components such as airbags, upholstery, and brake pads from various suppliers in the industry value chain. In order to lower costs and reduce the risk of interruptions in the supply of components, Nguyen should pursue

• backward integration.

• forward integration.

• geographic diversification.

• product diversification.

Sonron Corporation generates 85 percent of its annual revenues by manufacturing luxury cars. The company derives 15 percent of its annual revenues by selling sports merchandise such as apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Sonron Corporation?

• a conglomerate

• a subsidiary

• a dominant-business firm

• a single-business firm

Real estate agent Jensen sold first-time homebuyer Mitch a house. On the surface, the house appeared to be in good shape, but it turns out it has hidden structural issues that will cost a lot to fix. Mitch is angry that Jensen withheld this key information. Which of the following does this scenario best illustrate?

• learning-curve effect

• principal-agent problem

• information asymmetry

• experience-curve effect

The managers at Acme Corporation decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the declining performance in this sector?

• by motivating managers

• by giving outside firms an advantage

• by having higher performance in another sector

• by sharing their market power with competitors

BookWizard, a large online and offline book-selling company, decides to enter the college textbook market. Its goal is to create cobranded. university-specific websites that offer textbooks; clothing and accessories such as logo T-shirts and sweaters, baseball hats, and mugs; and a full range of peripheral items like notebooks, pens, art supplies, and the like. This scenario shows BookWizard’s pursuit of

• horizontal integration.

• geographic diversification.

• vertical integration.

• product diversification.

Which of the following business models in the landscaping industry is likely to scale most efficiently?

• a company that deploys a team of both skilled and unskilled landscapers to each customer’s location regardless of their needs

• a company that charges the same hourly rate for landscaping services no matter what the situation requires

• a company that offers three different bundles of services at a low, medium, and high price points regardless of service required

• a company that allows users of its website to schedule appointments with landscapers who specialize in the exact service required

Agency theory is ...

• conflicts that arise in corporations that should be addressed in the legal realm.

• the relationship between someone who makes decisions on behalf of another, the agent, and the person who has decisions made on their behalf, the principal.

• Another form of Creating Shared Value (CSV), though in a corporate format

• A kind of interchangeable corporate lingo