$1.$When HTC began making its own$-$branded smartphones, its customers for whom it made unbranded smartphones before left to use other suppliers. This is an example of:

$2.$ Automakers do not manufacture chips and so when demand for automobiles and trucks crashed right after the Covid$-19$ pandemic, they cut their chip orders. However, when demand bounced back, their chip supply did not necessarily bounce back. Had they been vertically integrated, this situation would not have occurred:

$3.$ To ensure an ample supply of its famous $$4\mathrm{.}99$ rotisserie chicken, Costco built a feed mill, hatchery and slaughter plant for chickens, producing $100$ million chickens. However if something goes wrong at this plant, you may not be able to find a rotisserie chicken at your local Costco. This is an example of:

$4.$Costco is a retailer and now it also operates a slaughter house. In managing both businesses, it seems that Costco has been able to overcome this administrative cost.

$5.$ The main reason Costco decided to build a slaughter house was to keep the price of its rotisseries chicken low. The rotisserie chicken is a loss leader. Nevertheless in building and operating its own slaughter house Costco may struggle to keep its losses less than what they would have been had Costco continued to buy chickens from companies such as Tyson Foods. This is an example of:

$6.$Apple designs its own chips but does not manufacture them, instead TSMC does, because Apple cannot overcome this administrative cost. In fact, TSMC makes chips for many companies including Nvidia, AMD, Qualcomm, etc. Although each of these companies can design the most advanced and complicated chips, they all use TSMC for manufacturing because it is the only one that can make these advanced, complicated chips. This is an example of chip companies that cannot overcome which administrative cost:

$7.$ Another reason many chip companies do not manufacture chips and instead use TSMC is that TSMC can use the same fab to make millions of chips for many different companies, as a result its costs to make chips will be lower. This is another example of an administrative cost that chip companies such as Apple cannot overcome:

Options$-$the incentive problem

$-$

$$differences in optimal scale in different stages of production

$-$

$$competitive effects

$-$

$$flexibility

$-$

$$compounding risk

$-$

$$developing distinctive capabilities

$-$

$$managing strategically different businesses

Each term is the correct answer to only ONE question.