Question 1

When the growth demands of a new venture differ from those of the parent's existing businesses:

Accepted Answer

A)  the risk of failure is lower 
B)  management's experience is less applicable 
C)  the venture presents a weak opportunity 
D)  none of the above 
A)  the risk of failure is lower 
B)  management's experience is less applicable 
C)  the venture presents a weak opportunity 
D)  none of the above B

Question 2

One motivation for diversification is favorable repositioning of the firm's current businesses. What are the potential benefits and risks associated with this motivation?

Accepted Answer

On the pro side, the new business may add resources or capabilities that improve the performance of the firm's core business units. For example, global media companies, such as Disney, Viacom, and Fox, commonly expand through the acquisition of content or distribution. Fox's development of Fox Kids allowed Rupert Murdoch to offer a more diverse bundle of programming to distributors in international markets, thus increasing the value of his existing entertainment units.
However, attempts at repositioning involve three major risks:
1) the benefit from the new business may be lower than expected;
2) the isolating mechanisms protecting the new business's contribution to the diversified firm may be weak and rivals may be able to copy or design around the business unit's capabilities;
3) the diversified firm may not be able to sustain the new business's market position.

Question 3

Which of the following types of contribution of the parent to the new venture is generally questionable?

Accepted Answer

A)  entrepreneurial management skills 
B)  general management skills 
C)  financial capital alone 
D)  none of the above 
A)  entrepreneurial management skills 
B)  general management skills 
C)  financial capital alone 
D)  none of the above C

Question 4

Which of the following factors or activities are critical determinants of cash flows in the Ongoing Operations stage of an acquisition?

Accepted Answer

A)  risk management 
B)  due diligence 
C)  dynamic capabilities 
D)  integration planning 
A)  risk management 
B)  due diligence 
C)  dynamic capabilities 
D)  integration planning

Question 5

One explanation for merger waves is shifts in the rules of competition in specific industries.

Accepted Answer

A) True 
 B)False

Question 6

Codifiable capabilities may add less value to a new venture because:

Accepted Answer

A)  they are harder to defend from imitation 
B)  they are more difficult to transfer than more tacit or intangible resources 
C)  their benefit to the corporate parent makes them difficult to transfer 
D)  none of the above 
A)  they are harder to defend from imitation 
B)  they are more difficult to transfer than more tacit or intangible resources 
C)  their benefit to the corporate parent makes them difficult to transfer 
D)  none of the above

Question 7

Which of the following is a determinant of an attractive market for diversification?

Accepted Answer

A)  large ultimate market size 
B)  strong market growth 
C)  a favorable future industry structure 
D)  all of the above 
A)  large ultimate market size 
B)  strong market growth 
C)  a favorable future industry structure 
D)  all of the above

Question 8

In both the turnaround and integration stages of an acquisition, a firm must make a significant contribution to the new unit to justify the diversification move to investors.

Accepted Answer

A) True 
 B)False

Question 9

How is the concept of open innovation related to diversification?

Accepted Answer

Most new business ideas or concepts orig

Question 10

Which types of new business will a corporation's financial capital contribute the most to?

Accepted Answer

A)  smaller units in mature industries 
B)  larger businesses in growing industries 
C)  smaller units in growing industries 
D)  larger businesses in mature industries 
A)  smaller units in mature industries 
B)  larger businesses in growing industries 
C)  smaller units in growing industries 
D)  larger businesses in mature industries

Question 11

Which of the following is not a key task in new venture governance within a corporation?

Accepted Answer

A)  building new coordination and control mechanisms 
B)  establishment of key relations with outside sources of capital 
C)  development of appropriate management incentives 
D)  use of separate resource allocation mechanisms 
A)  building new coordination and control mechanisms 
B)  establishment of key relations with outside sources of capital 
C)  development of appropriate management incentives 
D)  use of separate resource allocation mechanisms

Question 12

Which of the following is a valid type of contribution a new venture may make to the parent corporation?

Accepted Answer

A)  repositioning existing businesses 
B)  growth in corporate revenues and earnings 
C)  corporate risk reduction 
D)  all of the above 
A)  repositioning existing businesses 
B)  growth in corporate revenues and earnings 
C)  corporate risk reduction 
D)  all of the above

Question 13

Business diversification occurs when a product line is broadened or redesigned.

Accepted Answer

A) True 
 B)False

Question 14

Management expertise in designing and implementing a particular strategy within the parent company is potentially valuable for new ventures.

Accepted Answer

A) True 
 B)False

Question 15

As a motivation for diversification, risk reduction should not be subordinated to improving returns in each business unit.

Accepted Answer

A) True 
 B)False

Question 16

The problem of transferring capabilities is more acute for firms diversifying for the first time.

Accepted Answer

A) True 
 B)False

Question 17

A major risk in using a new venture to reposition existing businesses is that the diversifying firm may not be able to sustain the new venture's market position.

Accepted Answer

A) True 
 B)False

Question 18

A core competence combines which of the following two types of corporate contributions to a business:

Accepted Answer

A)  entrepreneurial skill and core marketing capability 
B)  risk reduction and technical capability 
C)  a strong technological platform and entrepreneurial skill 
D)  financial management and technical capability 
A)  entrepreneurial skill and core marketing capability 
B)  risk reduction and technical capability 
C)  a strong technological platform and entrepreneurial skill 
D)  financial management and technical capability

Question 19

Valuation methods for new business units need not be tailored to their markets.

Accepted Answer

A) True 
 B)False

Question 20

It is generally accepted that, on average, firms can be more efficient as a source of funds for a new business than the external capital markets they replace.

Accepted Answer

A) True 
 B)False

When the growth demands of a new venture differ from those of the parent's existing businesses:

One motivation for diversification is favorable repositioning of the firm's current businesses. What are the potential benefits and risks associated with this motivation?

Which of the following types of contribution of the parent to the new venture is generally questionable?

Which of the following factors or activities are critical determinants of cash flows in the Ongoing Operations stage of an acquisition?

One explanation for merger waves is shifts in the rules of competition in specific industries.

Codifiable capabilities may add less value to a new venture because:

Which of the following is a determinant of an attractive market for diversification?

In both the turnaround and integration stages of an acquisition, a firm must make a significant contribution to the new unit to justify the diversification move to investors.

How is the concept of open innovation related to diversification?

Which types of new business will a corporation's financial capital contribute the most to?

Which of the following is not a key task in new venture governance within a corporation?

Which of the following is a valid type of contribution a new venture may make to the parent corporation?

Business diversification occurs when a product line is broadened or redesigned.

Management expertise in designing and implementing a particular strategy within the parent company is potentially valuable for new ventures.

As a motivation for diversification, risk reduction should not be subordinated to improving returns in each business unit.

The problem of transferring capabilities is more acute for firms diversifying for the first time.

A major risk in using a new venture to reposition existing businesses is that the diversifying firm may not be able to sustain the new venture's market position.

A core competence combines which of the following two types of corporate contributions to a business:

Valuation methods for new business units need not be tailored to their markets.

It is generally accepted that, on average, firms can be more efficient as a source of funds for a new business than the external capital markets they replace.

Competitive Advantage

Industry Analysis

Strategy Over Time: Growth and Innovation

Strategy Execution

Partnering

Vertical Integration and Outsourcing

Partnering

Global Strategy

Managing the Multibusiness Firm

Corporate Governance

Filters

Exam 9: New Business Development

When the growth demands of a new venture differ from those of the parent's existing businesses:

One motivation for diversification is favorable repositioning of the firm's current businesses. What are the potential benefits and risks associated with this motivation?

Which of the following types of contribution of the parent to the new venture is generally questionable?

Which of the following factors or activities are critical determinants of cash flows in the Ongoing Operations stage of an acquisition?

One explanation for merger waves is shifts in the rules of competition in specific industries.

Codifiable capabilities may add less value to a new venture because:

Which of the following is a determinant of an attractive market for diversification?

In both the turnaround and integration stages of an acquisition, a firm must make a significant contribution to the new unit to justify the diversification move to investors.

How is the concept of open innovation related to diversification?

Which types of new business will a corporation's financial capital contribute the most to?

Which of the following is not a key task in new venture governance within a corporation?

Which of the following is a valid type of contribution a new venture may make to the parent corporation?

Business diversification occurs when a product line is broadened or redesigned.

Management expertise in designing and implementing a particular strategy within the parent company is potentially valuable for new ventures.

As a motivation for diversification, risk reduction should not be subordinated to improving returns in each business unit.

The problem of transferring capabilities is more acute for firms diversifying for the first time.

A major risk in using a new venture to reposition existing businesses is that the diversifying firm may not be able to sustain the new venture's market position.

A core competence combines which of the following two types of corporate contributions to a business:

Valuation methods for new business units need not be tailored to their markets.

It is generally accepted that, on average, firms can be more efficient as a source of funds for a new business than the external capital markets they replace.

Competitive Advantage

Industry Analysis

Strategy Over Time: Growth and Innovation

Strategy Execution

Partnering

Vertical Integration and Outsourcing

Partnering

Global Strategy

Managing the Multibusiness Firm

Corporate Governance

Filters