Chapter 7
DISCUSSION QUESTIONS
1. Why was it profitable for General Motors and Ford to integrate backward into component-parts manufacturing in the past, and why are both companies now trying to buy more of their parts from outside?
2. Under what conditions might concentration on a single business be inconsistent with the goal of maximizing stockholder wealth?
3. GM integrated vertically in the 1920s, diversified in the 1930s, and expanded overseas in the 1950s. Explain these developments with reference to the profitability of pursuing each strategy. Why do you think that vertical integration is normally the first strategy to be pursued after concentration on a single business?
4. What value creation activities should a company outsource to independent suppliers? What are the risks involved in outsourcing these activities?
5. When is a company likely to choose related diversification or unrelated diversification? Discuss with reference to an electronics manufacturer.