Question 1

An acquisition premium is the amount by which the price offered for an existing business exceeds:

Accepted Answer

A)  the pre-acquisition market value of the target company. 
B)  the fair market value of similar companies in the same geographic locale. 
C)  the comparable value of similar companies within the same market. 
D)  the amount paid as a down payment to be held in escrow until closing. 
E)  the difference between the amount that was offered and the amount that is escrowed. 
A)  the pre-acquisition market value of the target company. 
B)  the fair market value of similar companies in the same geographic locale. 
C)  the comparable value of similar companies within the same market. 
D)  the amount paid as a down payment to be held in escrow until closing. 
E)  the difference between the amount that was offered and the amount that is escrowed.

Question 2

Diversification ought to be considered when:

Accepted Answer

A)  a company's profits are being squeezed and it needs to increase its net profit margins and return on investment. 
B)  a company lacks sustainable competitive advantage in its present business. 
C)  a company begins to encounter diminishing market growth and stagnating sales prospects in its mainstay business. 
D)  a company has run out of ways to achieve a distinctive competence in its present business. 
E)  a company is under the gun to create a more attractive and cost-efficient value chain. 
A)  a company's profits are being squeezed and it needs to increase its net profit margins and return on investment. 
B)  a company lacks sustainable competitive advantage in its present business. 
C)  a company begins to encounter diminishing market growth and stagnating sales prospects in its mainstay business. 
D)  a company has run out of ways to achieve a distinctive competence in its present business. 
E)  a company is under the gun to create a more attractive and cost-efficient value chain.

Question 3

Which of the following is NOT one of the appeals of an unrelated diversification strategy?

Accepted Answer

A)  The ability to spread business risk over truly diverse industries (as compared to related diversification which is limited to spreading risk only among businesses with strategic fit). 
B)  An ability to employ the company's financial resources to maximum advantage by investing in whatever industries/businesses offer the best profit prospects. 
C)  The ability of superior top management to cope with the wide variety of problems encountered in managing a broadly diversified group of businesses. 
D)  A potential for achieving somewhat more stable corporate sales and profits over the course of economic upswings and downswings (to the extent the company diversifies into businesses whose ups and downs tend to occur at different times). 
E)  The potential to grow shareholder value by investing in bargain-priced or struggling companies with big upside profit potential,turning their operations around fairly quickly with infusions of cash and managerial know-how,and then riding the crest of higher profitability. 
A)  The ability to spread business risk over truly diverse industries (as compared to related diversification which is limited to spreading risk only among businesses with strategic fit). 
B)  An ability to employ the company's financial resources to maximum advantage by investing in whatever industries/businesses offer the best profit prospects. 
C)  The ability of superior top management to cope with the wide variety of problems encountered in managing a broadly diversified group of businesses. 
D)  A potential for achieving somewhat more stable corporate sales and profits over the course of economic upswings and downswings (to the extent the company diversifies into businesses whose ups and downs tend to occur at different times). 
E)  The potential to grow shareholder value by investing in bargain-priced or struggling companies with big upside profit potential,turning their operations around fairly quickly with infusions of cash and managerial know-how,and then riding the crest of higher profitability.

Question 4

Checking the competitive advantage potential of cross-business strategic fits in a diversified company involves evaluating the extent to which sister businesses present:

Accepted Answer

A)  opportunities to combine the performance of certain cross-business activities and thereby reduce costs. 
B)  opportunities to transfer skills,technology,or intellectual capital from one business to another. 
C)  opportunities for the company's different businesses to share use of a well-respected brand name. 
D)  opportunities for sister businesses to collaborate in creating valuable new competitive capabilities. 
E)  All of these. 
A)  opportunities to combine the performance of certain cross-business activities and thereby reduce costs. 
B)  opportunities to transfer skills,technology,or intellectual capital from one business to another. 
C)  opportunities for the company's different businesses to share use of a well-respected brand name. 
D)  opportunities for sister businesses to collaborate in creating valuable new competitive capabilities. 
E)  All of these.

Question 5

What does the industry attractiveness test involve in evaluating a diversified company's business lineup? Why is it relevant?

Accepted Answer

The answer of What does the industry attractiveness test involve...

Question 6

The task of crafting a company's overall corporate strategy for a diversified company encompasses:

Accepted Answer

A)  picking the new industries to enter and deciding on the means of entry. 
B)  initiating actions to boost the combined performance of the businesses the firm has entered. 
C)  pursuing opportunities to leverage cross-business value chain relationships and strategic fit into competitive advantage. 
D)  establishing investment priorities and steering corporate resources into the most attractive business units. 
E)  All of these. 
A)  picking the new industries to enter and deciding on the means of entry. 
B)  initiating actions to boost the combined performance of the businesses the firm has entered. 
C)  pursuing opportunities to leverage cross-business value chain relationships and strategic fit into competitive advantage. 
D)  establishing investment priorities and steering corporate resources into the most attractive business units. 
E)  All of these.

Question 7

Initiating actions to boost the combined performance of the corporation's collection of businesses requires the following strategic options,EXCEPT for:

Accepted Answer

A)  sticking closely with the existing business lineup and pursuing available opportunities. 
B)  broadening the scope of diversification by entering additional industries. 
C)  divesting some businesses and retrenching to a narrower collection of businesses. 
D)  restructuring the entire company by adding and removing businesses to improve overall performance. 
E)  refocusing the existing businesses on new substitute product-line opportunities outside the existing industry framework. 
A)  sticking closely with the existing business lineup and pursuing available opportunities. 
B)  broadening the scope of diversification by entering additional industries. 
C)  divesting some businesses and retrenching to a narrower collection of businesses. 
D)  restructuring the entire company by adding and removing businesses to improve overall performance. 
E)  refocusing the existing businesses on new substitute product-line opportunities outside the existing industry framework.

Question 8

What is the name of the process for developing new businesses as an outgrowth of a company's established business operations?

Accepted Answer

A)  Corporate venturing,corporate entrepreneurship,or intrapreneurship. 
B)  Value chain integration. 
C)  Resource capability process. 
D)  Diversification activity capabilities. 
E)  All of these. 
A)  Corporate venturing,corporate entrepreneurship,or intrapreneurship. 
B)  Value chain integration. 
C)  Resource capability process. 
D)  Diversification activity capabilities. 
E)  All of these.

Question 9

A joint venture is an attractive way for a company to enter a new industry when:

Accepted Answer

A)  a firm is missing some essential skills,capabilities,or resources and needs a partner to supply the missing expertise and competencies or fill the resource gaps. 
B)  it needs access to economies of scope and good financial fits in order to be cost-competitive. 
C)  it is uneconomical for the firm to achieve economies of scope on its own initiative. 
D)  the firm has no prior experience with diversification. 
E)  it has not built up a hoard of cash with which to finance a diversification effort. 
A)  a firm is missing some essential skills,capabilities,or resources and needs a partner to supply the missing expertise and competencies or fill the resource gaps. 
B)  it needs access to economies of scope and good financial fits in order to be cost-competitive. 
C)  it is uneconomical for the firm to achieve economies of scope on its own initiative. 
D)  the firm has no prior experience with diversification. 
E)  it has not built up a hoard of cash with which to finance a diversification effort.

Question 10

A key issue in companies pursuing an unrelated diversification strategy is:

Accepted Answer

A)  how wide a net to cast in building a portfolio of unrelated businesses. 
B)  whether to keep or divest businesses whose technological approaches do not match the overall technology and R&D strategy of the corporation. 
C)  how quickly to divest businesses whose competitive strategies do not closely match the competitive strategies of sister businesses. 
D)  whether to build shareholder value via paying higher dividends or via actions aimed at increasing the company's stock price. 
E)  whether to acquire new businesses that offer the potential for achieving greater economies of scope or businesses that offer the potential for achieving greater economies of scale. 
A)  how wide a net to cast in building a portfolio of unrelated businesses. 
B)  whether to keep or divest businesses whose technological approaches do not match the overall technology and R&D strategy of the corporation. 
C)  how quickly to divest businesses whose competitive strategies do not closely match the competitive strategies of sister businesses. 
D)  whether to build shareholder value via paying higher dividends or via actions aimed at increasing the company's stock price. 
E)  whether to acquire new businesses that offer the potential for achieving greater economies of scope or businesses that offer the potential for achieving greater economies of scale.

Question 11

Internal development of a new business subsidiary has become an increasingly important means for entering a desirable new business when:

Accepted Answer

A)  the company has ample time and adequate resources to launch the new internal startup business from the ground up. 
B)  there is a small pool of desirable acquisition candidates. 
C)  the target industry is growing rapidly and no good joint venture partners are available. 
D)  all of the potential acquisition candidates are losing money. 
E)  the target industry is comprised of several relatively large and well-established firms. 
A)  the company has ample time and adequate resources to launch the new internal startup business from the ground up. 
B)  there is a small pool of desirable acquisition candidates. 
C)  the target industry is growing rapidly and no good joint venture partners are available. 
D)  all of the potential acquisition candidates are losing money. 
E)  the target industry is comprised of several relatively large and well-established firms.

Question 12

In terms of strategy making,what is the difference between a one-business company and a diversified company?

Accepted Answer

A)  The first uses a business-level strategy,while the second uses a set of business strategies and a corporate strategy. 
B)  The first uses a business-level strategy,while the second uses a corporate-wide strategy. 
C)  The first uses an operating strategy,while the second uses a business-line strategy. 
D)  The first uses a functional strategy,while the second uses a business-line strategy. 
E)  All of these. 
A)  The first uses a business-level strategy,while the second uses a set of business strategies and a corporate strategy. 
B)  The first uses a business-level strategy,while the second uses a corporate-wide strategy. 
C)  The first uses an operating strategy,while the second uses a business-line strategy. 
D)  The first uses a functional strategy,while the second uses a business-line strategy. 
E)  All of these.

Question 13

Corporate restructuring strategies:

Accepted Answer

A)  involve making major changes in a diversified company's business lineup,divesting some businesses and/or acquiring others,so as to put a whole new face on the company's business lineup. 
B)  entail reducing the scope of diversification to a smaller number of businesses. 
C)  entail selling off marginal businesses to free up resources for redeployment to the remaining businesses. 
D)  focus on crafting initiatives to restore a diversified company's money-losing businesses to profitability. 
E)  focus on broadening the scope of diversification to include a larger number of businesses and boost the company's growth and profitability. 
A)  involve making major changes in a diversified company's business lineup,divesting some businesses and/or acquiring others,so as to put a whole new face on the company's business lineup. 
B)  entail reducing the scope of diversification to a smaller number of businesses. 
C)  entail selling off marginal businesses to free up resources for redeployment to the remaining businesses. 
D)  focus on crafting initiatives to restore a diversified company's money-losing businesses to profitability. 
E)  focus on broadening the scope of diversification to include a larger number of businesses and boost the company's growth and profitability.

Question 14

What is the business term given for a company that generates cash flows over and above its internal requirements and can provide the corporate parent with funds for reinvestment?

Accepted Answer

A)  Cash hog. 
B)  Cash cow. 
C)  Cash flow. 
D)  Free cash flow. 
E)  Cash generator. 
A)  Cash hog. 
B)  Cash cow. 
C)  Cash flow. 
D)  Free cash flow. 
E)  Cash generator.

Question 15

Briefly explain what is meant by each of the following terms:
a)relative market share
b)resource fit
c)a cash hog business
d)a cash cow business

Accepted Answer

a) Relative market share refers to a com

Question 16

What is the relevance of quantitatively measuring the competitive strength of each business in a diversified company's business portfolio and determining which business units are strongest and weakest?

Accepted Answer

The answer of What is the relevance of quantitatively measuring...

Question 17

Calculating quantitative attractiveness ratings for the industries a diversified company has invested in:

Accepted Answer

A)  allows a company to rank the competitive advantage opportunities in each industry from best to worst. 
B)  helps identify which industries have the best/worst prospects for revenue growth. 
C)  identifies which industry has the best/worst value chain from the standpoint of cost reduction potential. 
D)  provides a basis for deciding whether a diversified company has good prospects for growth and profitability,given the attractiveness ratings of the industries in which it has business interests. 
E)  helps identify which industry is likely to be the largest/smallest contributor to the company's growth and profitability. 
A)  allows a company to rank the competitive advantage opportunities in each industry from best to worst. 
B)  helps identify which industries have the best/worst prospects for revenue growth. 
C)  identifies which industry has the best/worst value chain from the standpoint of cost reduction potential. 
D)  provides a basis for deciding whether a diversified company has good prospects for growth and profitability,given the attractiveness ratings of the industries in which it has business interests. 
E)  helps identify which industry is likely to be the largest/smallest contributor to the company's growth and profitability.

Question 18

Diversification merits strong consideration whenever a single-business company:

Accepted Answer

A)  has integrated backward and forward as far as it can. 
B)  is faced with diminishing market opportunities and stagnating sales in its principal business. 
C)  has achieved industry leadership in its main line of business. 
D)  encounters declining profits in its mainstay business. 
E)  faces strong competition and is struggling to earn a good profit. 
A)  has integrated backward and forward as far as it can. 
B)  is faced with diminishing market opportunities and stagnating sales in its principal business. 
C)  has achieved industry leadership in its main line of business. 
D)  encounters declining profits in its mainstay business. 
E)  faces strong competition and is struggling to earn a good profit.

Question 19

A company pursuing a related diversification strategy would likely address the issue of what additional industries/businesses to diversify into by:

Accepted Answer

A)  locating businesses with well-known brand names and large market shares. 
B)  identifying industries with the least competitive intensity. 
C)  identifying an attractive industry whose value chain has good strategic fit with one or more of the firm's present businesses. 
D)  identifying businesses with the potential to diversify the number and types of different activities in the firm's value chain makeup. 
E)  locating new businesses with high degrees of financial fit with its present businesses. 
A)  locating businesses with well-known brand names and large market shares. 
B)  identifying industries with the least competitive intensity. 
C)  identifying an attractive industry whose value chain has good strategic fit with one or more of the firm's present businesses. 
D)  identifying businesses with the potential to diversify the number and types of different activities in the firm's value chain makeup. 
E)  locating new businesses with high degrees of financial fit with its present businesses.

Question 20

A company can best accomplish diversification into new industries by:

Accepted Answer

A)  outsourcing most of the value chain activities that have to be performed in the target business/industry. 
B)  acquiring a company already operating in the target industry,creating a new business subsidiary to compete in the target industry,or forming a joint venture with another company to enter the target industry. 
C)  integrating forward or backward into the target industry. 
D)  shifting from a strategic group comprised mostly of single-business companies to a strategic group comprised of diversified companies. 
E)  employing an offensive strategy with new product innovation as its centerpiece. 
A)  outsourcing most of the value chain activities that have to be performed in the target business/industry. 
B)  acquiring a company already operating in the target industry,creating a new business subsidiary to compete in the target industry,or forming a joint venture with another company to enter the target industry. 
C)  integrating forward or backward into the target industry. 
D)  shifting from a strategic group comprised mostly of single-business companies to a strategic group comprised of diversified companies. 
E)  employing an offensive strategy with new product innovation as its centerpiece.

An acquisition premium is the amount by which the price offered for an existing business exceeds:

Diversification ought to be considered when:

Which of the following is NOT one of the appeals of an unrelated diversification strategy?

Checking the competitive advantage potential of cross-business strategic fits in a diversified company involves evaluating the extent to which sister businesses present:

What does the industry attractiveness test involve in evaluating a diversified company's business lineup? Why is it relevant?

The task of crafting a company's overall corporate strategy for a diversified company encompasses:

Initiating actions to boost the combined performance of the corporation's collection of businesses requires the following strategic options,EXCEPT for:

What is the name of the process for developing new businesses as an outgrowth of a company's established business operations?

A joint venture is an attractive way for a company to enter a new industry when:

A key issue in companies pursuing an unrelated diversification strategy is:

Internal development of a new business subsidiary has become an increasingly important means for entering a desirable new business when:

In terms of strategy making,what is the difference between a one-business company and a diversified company?

Corporate restructuring strategies:

What is the business term given for a company that generates cash flows over and above its internal requirements and can provide the corporate parent with funds for reinvestment?

Briefly explain what is meant by each of the following terms: a)relative market share b)resource fit c)a cash hog business d)a cash cow business

What is the relevance of quantitatively measuring the competitive strength of each business in a diversified company's business portfolio and determining which business units are strongest and weakest?

Calculating quantitative attractiveness ratings for the industries a diversified company has invested in:

Diversification merits strong consideration whenever a single-business company:

A company pursuing a related diversification strategy would likely address the issue of what additional industries/businesses to diversify into by:

A company can best accomplish diversification into new industries by:

What Is Strategy and Why Is It Important

Charting a Companys Direction: Its Vision, Mission, Objectives, and Strategy

Evaluating a Companys External Environment

Evaluating a Companys Resources, Capabilities, and Competitiveness

The Five Generic Competitive Strategies: Which One to Employ

Strengthening a Companys Competitive Position: Strategic Moves, Timing, and Scope of Operations

Strategies for Competing in International Markets

Ethics, corporate Social Responsibility, Environmental Sustainability, and Strategy

Building an Organization Capable of Good Strategy Execution: People, Capabilities, and Structure

Managing Internal Operations: Actions That Promote Good Strategy Execution

Corporate Culture and Leadership: Keys to Good Strategy Execution

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Exam 8: Corporate Strategy: Diversification and the Multibusiness Company

An acquisition premium is the amount by which the price offered for an existing business exceeds:

Diversification ought to be considered when:

Which of the following is NOT one of the appeals of an unrelated diversification strategy?

Checking the competitive advantage potential of cross-business strategic fits in a diversified company involves evaluating the extent to which sister businesses present:

What does the industry attractiveness test involve in evaluating a diversified company's business lineup? Why is it relevant?

The task of crafting a company's overall corporate strategy for a diversified company encompasses:

Initiating actions to boost the combined performance of the corporation's collection of businesses requires the following strategic options,EXCEPT for:

What is the name of the process for developing new businesses as an outgrowth of a company's established business operations?

A joint venture is an attractive way for a company to enter a new industry when:

A key issue in companies pursuing an unrelated diversification strategy is:

Internal development of a new business subsidiary has become an increasingly important means for entering a desirable new business when:

In terms of strategy making,what is the difference between a one-business company and a diversified company?

Corporate restructuring strategies:

What is the business term given for a company that generates cash flows over and above its internal requirements and can provide the corporate parent with funds for reinvestment?

Briefly explain what is meant by each of the following terms: a)relative market share b)resource fit c)a cash hog business d)a cash cow business

What is the relevance of quantitatively measuring the competitive strength of each business in a diversified company's business portfolio and determining which business units are strongest and weakest?

Calculating quantitative attractiveness ratings for the industries a diversified company has invested in:

Diversification merits strong consideration whenever a single-business company:

A company pursuing a related diversification strategy would likely address the issue of what additional industries/businesses to diversify into by:

A company can best accomplish diversification into new industries by:

What Is Strategy and Why Is It Important

Charting a Companys Direction: Its Vision, Mission, Objectives, and Strategy

Evaluating a Companys External Environment

Evaluating a Companys Resources, Capabilities, and Competitiveness

The Five Generic Competitive Strategies: Which One to Employ

Strengthening a Companys Competitive Position: Strategic Moves, Timing, and Scope of Operations

Strategies for Competing in International Markets

Ethics, corporate Social Responsibility, Environmental Sustainability, and Strategy

Building an Organization Capable of Good Strategy Execution: People, Capabilities, and Structure

Managing Internal Operations: Actions That Promote Good Strategy Execution

Corporate Culture and Leadership: Keys to Good Strategy Execution

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