Question 1

What factors should management consider when ranking business units and setting a priority for resource allocation?

Accepted Answer

Answers may vary.

Question 2

The businesses in a diversified company's lineup exhibit good resource fit when

Accepted Answer

A)  the resource requirements of each of its businesses exactly match the resources the company has available. 
B)  its individual businesses add to a company's resource strengths and when it has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin. 
C)  each business unit generates just enough cash flow annually to fund its own capital requirements and thus does not require cash infusions from the corporate parent. 
D)  each business unit produces sufficient cash flows over and above what is needed to build and maintain the business,thereby providing the parent company with enough cash to pay shareholders a generous and steadily increasing dividend. 
E)  there are enough cash cow businesses to support the capital requirements of the cash hog businesses. 
A)  the resource requirements of each of its businesses exactly match the resources the company has available. 
B)  its individual businesses add to a company's resource strengths and when it has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin. 
C)  each business unit generates just enough cash flow annually to fund its own capital requirements and thus does not require cash infusions from the corporate parent. 
D)  each business unit produces sufficient cash flows over and above what is needed to build and maintain the business,thereby providing the parent company with enough cash to pay shareholders a generous and steadily increasing dividend. 
E)  there are enough cash cow businesses to support the capital requirements of the cash hog businesses. B

Question 3

The option of sticking with the current business lineup makes sense when

Accepted Answer

A)  the company's present businesses offer attractive growth opportunities and can be counted on to generate good earnings and cash flows for shareholders. 
B)  companies are seeking multinational diversification. 
C)  corporate executives are excited about market opportunities. 
D)  corporate executives are satisfied with current performance of each of their businesses and can use redirect capabilities and resources for expansion opportunities. 
E)  corporate executives want to divest some businesses and retrench to a narrower diversification base. 
A)  the company's present businesses offer attractive growth opportunities and can be counted on to generate good earnings and cash flows for shareholders. 
B)  companies are seeking multinational diversification. 
C)  corporate executives are excited about market opportunities. 
D)  corporate executives are satisfied with current performance of each of their businesses and can use redirect capabilities and resources for expansion opportunities. 
E)  corporate executives want to divest some businesses and retrench to a narrower diversification base. A

Question 4

A cash cow type of business

Accepted Answer

A)  generates unusually high profits and returns on equity investment. 
B)  is so profitable that it has no long-term debt. 
C)  generates positive cash flows over and above its internal requirements,thus providing a corporate parent with cash flows that can be used for financing new acquisitions,investing in cash hog businesses,funding share buyback programs,and/or paying dividends. 
D)  is a business with such a strong competitive advantage that it generates big profits,big returns on investment,and big cash surpluses after dividends are paid. 
E)  has good strategic fit with a cash hog business. 
A)  generates unusually high profits and returns on equity investment. 
B)  is so profitable that it has no long-term debt. 
C)  generates positive cash flows over and above its internal requirements,thus providing a corporate parent with cash flows that can be used for financing new acquisitions,investing in cash hog businesses,funding share buyback programs,and/or paying dividends. 
D)  is a business with such a strong competitive advantage that it generates big profits,big returns on investment,and big cash surpluses after dividends are paid. 
E)  has good strategic fit with a cash hog business.

Question 5

In a diversified company,the competitive advantage potential of cross-business strategic fit is greater when

Accepted Answer

A)  the business lineup includes a number of cash cows. 
B)  valuable opportunities exist to transfer skills,technology,or intellectual capital from one business to another,combine the performance of related activities,or share the use of a well-respected brand name across multiple products or service categories. 
C)  the strategy maps of the various business units converge. 
D)  businesses included in the corporate portfolio compete in fast-growing industries. 
E)  competition is less intense and driving forces are relatively weak. 
A)  the business lineup includes a number of cash cows. 
B)  valuable opportunities exist to transfer skills,technology,or intellectual capital from one business to another,combine the performance of related activities,or share the use of a well-respected brand name across multiple products or service categories. 
C)  the strategy maps of the various business units converge. 
D)  businesses included in the corporate portfolio compete in fast-growing industries. 
E)  competition is less intense and driving forces are relatively weak.

Question 6

To test whether a particular diversification move has good prospects for creating added shareholder value,corporate strategists should use the

Accepted Answer

A)  profit test,the competitive strength test,and the industry attractiveness test. 
B)  better-off test,the competitive advantage test,and the profit expectations test. 
C)  barrier to entry test,the competitive advantage test,and the stock price effect test. 
D)  strategic fit test,the industry attractiveness test,and the dividend effect test. 
E)  the industry attractiveness test,the cost-of-entry test,and the better-off test. 
A)  profit test,the competitive strength test,and the industry attractiveness test. 
B)  better-off test,the competitive advantage test,and the profit expectations test. 
C)  barrier to entry test,the competitive advantage test,and the stock price effect test. 
D)  strategic fit test,the industry attractiveness test,and the dividend effect test. 
E)  the industry attractiveness test,the cost-of-entry test,and the better-off test.

Question 7

Briefly discuss when it makes good strategic sense for a company to consider diversification.

Accepted Answer

The answer of Briefly discuss when it makes good strategic...

Question 8

The three tests for judging whether a particular diversification move can create value for shareholders are the

Accepted Answer

A)  industry attractiveness test,the profitability test,and the shareholder value test. 
B)  strategic fit test,the competitive advantage test,and the return on investment test. 
C)  resource fit test,the profitability test,and the shareholder value test. 
D)  attractiveness test,the cost-of-entry test,and the better-off test. 
E)  shareholder value test,the cost-of-entry test,and the profitability test. 
A)  industry attractiveness test,the profitability test,and the shareholder value test. 
B)  strategic fit test,the competitive advantage test,and the return on investment test. 
C)  resource fit test,the profitability test,and the shareholder value test. 
D)  attractiveness test,the cost-of-entry test,and the better-off test. 
E)  shareholder value test,the cost-of-entry test,and the profitability test.

Question 9

Which one of the following is not a factor that makes it appealing to diversify into a new industry by forming an internal start-up subsidiary to enter and compete in the target industry?

Accepted Answer

A)  when internal entry is cheaper than entry via acquisition 
B)  when a company possesses the skills and resources needed to compete effectively and there is ample time to launch the business 
C)  when adding new production capacity will not adversely impact the supply/demand balance in the industry 
D)  when the industry is growing rapidly and the target industry is comprised of several relatively large and well-established firms 
E)  when incumbent firms are likely to be slow or ineffective in combating a new entrant's efforts to crack the market 
A)  when internal entry is cheaper than entry via acquisition 
B)  when a company possesses the skills and resources needed to compete effectively and there is ample time to launch the business 
C)  when adding new production capacity will not adversely impact the supply/demand balance in the industry 
D)  when the industry is growing rapidly and the target industry is comprised of several relatively large and well-established firms 
E)  when incumbent firms are likely to be slow or ineffective in combating a new entrant's efforts to crack the market

Question 10

Diversifying into new businesses can be considered a success only if it

Accepted Answer

A)  results in increased profit margins and bigger total profits. 
B)  builds shareholder value. 
C)  helps a company escape the rigors of competition in its present business. 
D)  leads to the development of a greater variety of distinctive competencies and competitive capabilities. 
E)  helps the company overcome the barriers to entering additional foreign markets. 
A)  results in increased profit margins and bigger total profits. 
B)  builds shareholder value. 
C)  helps a company escape the rigors of competition in its present business. 
D)  leads to the development of a greater variety of distinctive competencies and competitive capabilities. 
E)  helps the company overcome the barriers to entering additional foreign markets.

Question 11

When industry attractiveness ratings are calculated for each of the industries a multibusiness company has diversified into,the results help indicate

Accepted Answer

A)  which industries appear to be the most and least attractive from the standpoint of the company's long-term performance. 
B)  which industries have attractive key success factors and which have unattractive key success factors. 
C)  which industries have the biggest economies of scale and which have the greatest economies of scope and the overall potential for cost reduction in the industries as a group. 
D)  which industries are most attractive from the standpoint of long-term growth and the growth prospects of all the industries as a group. 
E)  which industries are most attractive from the standpoint of industry driving forces and competitive forces. 
A)  which industries appear to be the most and least attractive from the standpoint of the company's long-term performance. 
B)  which industries have attractive key success factors and which have unattractive key success factors. 
C)  which industries have the biggest economies of scale and which have the greatest economies of scope and the overall potential for cost reduction in the industries as a group. 
D)  which industries are most attractive from the standpoint of long-term growth and the growth prospects of all the industries as a group. 
E)  which industries are most attractive from the standpoint of industry driving forces and competitive forces.

Question 12

In analyzing the Nine-Cell Industry Attractiveness-Competitive Strength Matrix,those businesses occupying the three cells in the lower right corner of the matrix

Accepted Answer

A)  are typically weak performers and have the lowest claim on corporate resources. 
B)  typically are prime candidates for divesture. 
C)  are destined for squeezing out the maximum cash flows. 
D)  typically have dimmer profit outlooks than those in the middle with medium resource priority. 
E)  All of these choices are correct. 
A)  are typically weak performers and have the lowest claim on corporate resources. 
B)  typically are prime candidates for divesture. 
C)  are destined for squeezing out the maximum cash flows. 
D)  typically have dimmer profit outlooks than those in the middle with medium resource priority. 
E)  All of these choices are correct.

Question 13

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves assessing whether the diversification move

Accepted Answer

A)  will make the company better off because it will produce a greater number of core competencies. 
B)  will make the company better off by improving its balance sheet strength and credit rating. 
C)  will make the company better off by spreading shareholder risks across a greater number of businesses and industries. 
D)  offers potential for the company's existing businesses and new businesses to perform better together under a single corporate umbrella. 
E)  will benefit shareholders due to gains in earnings per share and faster stock price appreciation. 
A)  will make the company better off because it will produce a greater number of core competencies. 
B)  will make the company better off by improving its balance sheet strength and credit rating. 
C)  will make the company better off by spreading shareholder risks across a greater number of businesses and industries. 
D)  offers potential for the company's existing businesses and new businesses to perform better together under a single corporate umbrella. 
E)  will benefit shareholders due to gains in earnings per share and faster stock price appreciation.

Question 14

The options for allocating a diversified company's financial resources include

Accepted Answer

A)  making acquisitions to establish positions in new businesses or to complement existing businesses. 
B)  investing in ways to strengthen or grow existing businesses. 
C)  funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses. 
D)  paying off existing debt,increasing dividends,building cash reserves,or repurchasing shares of the company's stock. 
E)  All of these choices are correct. 
A)  making acquisitions to establish positions in new businesses or to complement existing businesses. 
B)  investing in ways to strengthen or grow existing businesses. 
C)  funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses. 
D)  paying off existing debt,increasing dividends,building cash reserves,or repurchasing shares of the company's stock. 
E)  All of these choices are correct.

Question 15

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 16

The basic purpose of calculating competitive strength scores for each of a diversified company's business units is to

Accepted Answer

A)  rank the business unit from best to worst in terms of potential for cost reduction and profit margin improvement. 
B)  provide a quantitative measure of the overall market strength and competitive standing for each business unit. 
C)  determine which business unit has the greatest number of resource strengths,competencies,and competitive capabilities,and which one has the least. 
D)  determine which one has the biggest market share and is growing the fastest. 
E)  rank each business unit's strategy from best to worst. 
A)  rank the business unit from best to worst in terms of potential for cost reduction and profit margin improvement. 
B)  provide a quantitative measure of the overall market strength and competitive standing for each business unit. 
C)  determine which business unit has the greatest number of resource strengths,competencies,and competitive capabilities,and which one has the least. 
D)  determine which one has the biggest market share and is growing the fastest. 
E)  rank each business unit's strategy from best to worst.

Question 17

Which of the following is not a major consideration in evaluating the pluses and minuses of a diversified company's strategy?

Accepted Answer

A)  checking whether the company's resources fit the requirements of its present business lineup 
B)  scrutinizing each industry/business to determine where driving forces are strongest/weakest and how many profitable strategic groups the company has diversified into 
C)  ranking the performance prospects of the various businesses from best to worst and determining what the corporate parent's priorities should be in allocating resources to its different businesses 
D)  evaluating the extent of cross-business strategic fits 
E)  assessing the competitive strength of each business the company has diversified into 
A)  checking whether the company's resources fit the requirements of its present business lineup 
B)  scrutinizing each industry/business to determine where driving forces are strongest/weakest and how many profitable strategic groups the company has diversified into 
C)  ranking the performance prospects of the various businesses from best to worst and determining what the corporate parent's priorities should be in allocating resources to its different businesses 
D)  evaluating the extent of cross-business strategic fits 
E)  assessing the competitive strength of each business the company has diversified into

Question 18

When calculating industry attractiveness scores,to produce a valid response it is necessary to

Accepted Answer

A)  ensure the appropriate weights are assigned to each measure and that the preparer has sufficient knowledge to rate the industry on each attractiveness measure. 
B)  ensure the weights are assigned evenly so as not to bias the attractiveness scores. 
C)  ensure at least three companies within the industry are clearly well-understood to ensure validated scores. 
D)  be prepared to make an educated guess if the available information is skimpy. 
E)  All of these choices are correct. 
A)  ensure the appropriate weights are assigned to each measure and that the preparer has sufficient knowledge to rate the industry on each attractiveness measure. 
B)  ensure the weights are assigned evenly so as not to bias the attractiveness scores. 
C)  ensure at least three companies within the industry are clearly well-understood to ensure validated scores. 
D)  be prepared to make an educated guess if the available information is skimpy. 
E)  All of these choices are correct.

Question 19

To create value for shareholders via diversification,a company must

Accepted Answer

A)  get into new businesses that are profitable. 
B)  diversify into industries that are growing rapidly. 
C)  spread its business risk across various industries by only acquiring firms that are strong competitors in their respective industries. 
D)  diversify into businesses that can perform better under a single corporate umbrella than they could perform operating as independent,stand-alone businesses. 
E)  diversify into businesses that have either key success factors or value chains that are similar to its present businesses. 
A)  get into new businesses that are profitable. 
B)  diversify into industries that are growing rapidly. 
C)  spread its business risk across various industries by only acquiring firms that are strong competitors in their respective industries. 
D)  diversify into businesses that can perform better under a single corporate umbrella than they could perform operating as independent,stand-alone businesses. 
E)  diversify into businesses that have either key success factors or value chains that are similar to its present businesses.

Question 20

Diversification merits strong consideration whenever a single-business company

Accepted Answer

A)  has integrated backward and forward as far as it can. 
B)  faces 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)  faces 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.

What factors should management consider when ranking business units and setting a priority for resource allocation?

The businesses in a diversified company's lineup exhibit good resource fit when

The option of sticking with the current business lineup makes sense when

A cash cow type of business

In a diversified company,the competitive advantage potential of cross-business strategic fit is greater when

To test whether a particular diversification move has good prospects for creating added shareholder value,corporate strategists should use the

Briefly discuss when it makes good strategic sense for a company to consider diversification.

The three tests for judging whether a particular diversification move can create value for shareholders are the

Which one of the following is not a factor that makes it appealing to diversify into a new industry by forming an internal start-up subsidiary to enter and compete in the target industry?

Diversifying into new businesses can be considered a success only if it

When industry attractiveness ratings are calculated for each of the industries a multibusiness company has diversified into,the results help indicate

In analyzing the Nine-Cell Industry Attractiveness-Competitive Strength Matrix,those businesses occupying the three cells in the lower right corner of the matrix

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves assessing whether the diversification move

The options for allocating a diversified company's financial resources include

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

The basic purpose of calculating competitive strength scores for each of a diversified company's business units is to

Which of the following is not a major consideration in evaluating the pluses and minuses of a diversified company's strategy?

When calculating industry attractiveness scores,to produce a valid response it is necessary to

To create value for shareholders via diversification,a company must

Diversification merits strong consideration whenever a single-business company

Strategy,Business Models, and Competitive Advantage

Strategy Formulation, Execution, and Governance

Evaluating a Companys External Environment

Evaluating a Company Resources, Capabilities, and Competitiveness

The Five Generic Competitive Strategies

Strength-Ending a Company Competitive Position: Strategic Moves, Timing, and Scope of Operations

Strategies for Competing in International Markets

Ethics,Corporate Social Responsibility,Environmental Sustainability, and Strategy

Super Strategy Execution-Another Path to Competitive Advantage

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Exam 8: Corporate Strategy: Diversification and the Multi-Business Company

What factors should management consider when ranking business units and setting a priority for resource allocation?

The businesses in a diversified company's lineup exhibit good resource fit when

The option of sticking with the current business lineup makes sense when

A cash cow type of business

In a diversified company,the competitive advantage potential of cross-business strategic fit is greater when

To test whether a particular diversification move has good prospects for creating added shareholder value,corporate strategists should use the

Briefly discuss when it makes good strategic sense for a company to consider diversification.

The three tests for judging whether a particular diversification move can create value for shareholders are the

Which one of the following is not a factor that makes it appealing to diversify into a new industry by forming an internal start-up subsidiary to enter and compete in the target industry?

Diversifying into new businesses can be considered a success only if it

When industry attractiveness ratings are calculated for each of the industries a multibusiness company has diversified into,the results help indicate

In analyzing the Nine-Cell Industry Attractiveness-Competitive Strength Matrix,those businesses occupying the three cells in the lower right corner of the matrix

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves assessing whether the diversification move

The options for allocating a diversified company's financial resources include

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

The basic purpose of calculating competitive strength scores for each of a diversified company's business units is to

Which of the following is not a major consideration in evaluating the pluses and minuses of a diversified company's strategy?

When calculating industry attractiveness scores,to produce a valid response it is necessary to

To create value for shareholders via diversification,a company must

Diversification merits strong consideration whenever a single-business company

Strategy,Business Models, and Competitive Advantage

Strategy Formulation, Execution, and Governance

Evaluating a Companys External Environment

Evaluating a Company Resources, Capabilities, and Competitiveness

The Five Generic Competitive Strategies

Strength-Ending a Company Competitive Position: Strategic Moves, Timing, and Scope of Operations

Strategies for Competing in International Markets

Ethics,Corporate Social Responsibility,Environmental Sustainability, and Strategy

Super Strategy Execution-Another Path to Competitive Advantage

Filters