TerraLoc Competes in the Market for Global Positioning Devices and Services

question 50

Multiple Choice

TerraLoc competes in the market for global positioning devices and services. The company manufactures its own GPS units, which are smaller than those of any other competitor and include a proprietary battery that lasts 200% longer than any other competitor's battery and that TerraLoc manufacturers on-site. TerraLoc also has developed proprietary software that is much faster and more precise than that of any competitor. When developing the proprietary battery, TerraLoc decided to manufacturer the battery in-house to reduce the possibility that the company it outsourced the battery manufacturing to might reverse engineer the battery and sell a similar product to competitors. This possibility was especially troubling given that the company expected a significant increase in demand due to the improved battery life. Additionally, TerraLoc sells its products and services through its own direct sales force to ensure that its representatives highlight the longer battery life of TerraLoc's units.
-TerraLoc's development of the new battery technology is likely to

• A) reduce the rarity of TerraLoc's vertical integration strategy since competitors can purchase batteries from other sources.
• B) increase the rarity of TerraLoc's vertical integration strategy since TerraLoc has reduced uncertainties related to increased battery life in its products.
• C) increase the imitability of TerraLoc's vertical integration strategy since competitors can purchase traditional batteries from other sources.
• D) decrease the imitability of TerraLoc's vertical integration strategy since it increases competitors' flexibility.

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