Chapter $6$: Vertical Integration

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challenge Questions

$6\mathrm{.}1.$ Some firms have engaged in backward vertical integration strategies jin order to appropriate the economic prof its that would have been earned by suppliers selling to them. How is this motivation for backward vertical integration related to the opportunism logic for vertical integration described in this chapter? $($Hint: Compare the competitive conditions under which fims may earn economic profits to the competitive conditions under which firms will be motivated to avoid opportunism through vertical integration.$)$

$6\mathrm{.}2.$ You are about to purchase a used car. What kinds of threats do you face in this purchase?

$6\mathrm{.}3.$ You are about to purchase a used car. What can you do to protect yourself from the threats in this situation?

$6\mathrm{.}4.$ How is buying a car like and unlike vertical integration decisions?

$6\mathrm{.}5.$ What are the competitive implications for firms if they assume that all potential exchange partners cannot be trusted?

$6\mathrm{.}6.$ Common conflicts between sales and manufacturing are mentioned in the text. What conflicts might exist between other functional areas? Consider the following pairings: research and development and

manufacturing; finance and manufacturing; marketing and sales; and accounting and everyone else?

$6\mathrm{.}7.$ What could a CEO do to help resolve the conflicts found between functional areas of the organization?

$6\mathrm{.}8.$ Under what conditions would you accept a lower$-$paying job over a higher$-$paying one?

$6\mathrm{.}9.$ What implications does your accepting a lower$-$paying job over a higher$-$paying one have for your potential employer's compensation policy?