Question 1

A comprehensive evaluation of the group of businesses a company has diversified into involves

Accepted Answer

A)  evaluating the attractiveness of industries the company has diversified into and the competitive strength of each of its business units. 
B)  evaluating the strategic fits and resource fits among the various sister businesses. 
C)  ranking the performance prospects of the businesses from best to worst and determining what the corporate parent's priorities should be in allocating resources to its various businesses. 
D)  using the results of the prior analytical steps as a basis for crafting new strategic moves to improve the company's overall performance. 
E)  All of these. 
A)  evaluating the attractiveness of industries the company has diversified into and the competitive strength of each of its business units. 
B)  evaluating the strategic fits and resource fits among the various sister businesses. 
C)  ranking the performance prospects of the businesses from best to worst and determining what the corporate parent's priorities should be in allocating resources to its various businesses. 
D)  using the results of the prior analytical steps as a basis for crafting new strategic moves to improve the company's overall performance. 
E)  All of these. E

Question 2

The value of determining the relative competitive strength of each business a company has diversified into is

Accepted Answer

A)  to have a quantitative basis for identifying which businesses have large/small competitive advantages or competitive disadvantages vis-à-vis the rivals in their respective industries. 
B)  to have a quantitative basis for rating them from strongest to weakest in terms of contributing to the corporate parent's revenue growth. 
C)  to compare resource strengths and weaknesses,business by business. 
D)  to have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries. 
E)  to have a quantitative basis for rating them from strongest to weakest in terms of contributing to the corporate parent's profitability. 
A)  to have a quantitative basis for identifying which businesses have large/small competitive advantages or competitive disadvantages vis-à-vis the rivals in their respective industries. 
B)  to have a quantitative basis for rating them from strongest to weakest in terms of contributing to the corporate parent's revenue growth. 
C)  to compare resource strengths and weaknesses,business by business. 
D)  to have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries. 
E)  to have a quantitative basis for rating them from strongest to weakest in terms of contributing to the corporate parent's profitability. D

Question 3

Conditions that may make corporate restructuring strategies appealing include

Accepted Answer

A)  an excessive debt burden with interest costs that eat deeply into profitability. 
B)  a business lineup that consists of too many businesses competing in slow-growth,declining,or low-margin industries. 
C)  a lineup containing too many competitively weak businesses. 
D)  ill-chosen acquisitions that haven't lived up to expectations. 
E)  All of these. 
A)  an excessive debt burden with interest costs that eat deeply into profitability. 
B)  a business lineup that consists of too many businesses competing in slow-growth,declining,or low-margin industries. 
C)  a lineup containing too many competitively weak businesses. 
D)  ill-chosen acquisitions that haven't lived up to expectations. 
E)  All of these. E

Question 4

Businesses are said to be "related" when

Accepted Answer

A)  they have several key suppliers and several key customers in common. 
B)  their value chains have the same number of primary activities. 
C)  their products are both sold through retailers. 
D)  their value chains possess competitively valuable cross-business relationships that present opportunities to transfer skills and capabilities from one business to another,share resources or facilities to reduce costs,share use of a well-known brand name,and/or create mutually useful resource strengths and capabilities. 
E)  many consumers buy the products/services of both businesses. 
A)  they have several key suppliers and several key customers in common. 
B)  their value chains have the same number of primary activities. 
C)  their products are both sold through retailers. 
D)  their value chains possess competitively valuable cross-business relationships that present opportunities to transfer skills and capabilities from one business to another,share resources or facilities to reduce costs,share use of a well-known brand name,and/or create mutually useful resource strengths and capabilities. 
E)  many consumers buy the products/services of both businesses.

Question 5

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 6

Under what circumstances might an already diversified company chose to enter additional businesses and broaden its diversification base?

Accepted Answer

There are several circumstances under wh

Question 7

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

Accepted Answer

A)  the resource requirements of each business exactly match the resources the company has available. 
B)  individual businesses add to a company's resource strengths and when a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin. 
C)  each business 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 business exactly match the resources the company has available. 
B)  individual businesses add to a company's resource strengths and when a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin. 
C)  each business 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.

Question 8

Economies of scope

Accepted Answer

A)  are cost reductions that flow from cost-saving strategic fits along the value chains of related businesses in the business lineup of a multibusiness corporation. 
B)  arise only from strategic fit relationships in the production portions of the value chains of sister businesses. 
C)  are more associated with unrelated diversification than related diversification. 
D)  are present whenever diversification satisfies the attractiveness test and the cost-of-entry test. 
E)  arise mainly from strategic fit relationships in the distribution portions of the value chains of unrelated businesses. 
A)  are cost reductions that flow from cost-saving strategic fits along the value chains of related businesses in the business lineup of a multibusiness corporation. 
B)  arise only from strategic fit relationships in the production portions of the value chains of sister businesses. 
C)  are more associated with unrelated diversification than related diversification. 
D)  are present whenever diversification satisfies the attractiveness test and the cost-of-entry test. 
E)  arise mainly from strategic fit relationships in the distribution portions of the value chains of unrelated businesses.

Question 9

Retrenching to a narrower diversification base

Accepted Answer

A)  is usually the most attractive long-run strategy for a broadly diversified company confronted with recession,high interest rates,mounting competitive pressures in several of its businesses,and sluggish growth. 
B)  is directed at improving long-term performance by building stronger positions in a smaller number of core businesses. 
C)  is an attractive strategy option for revamping a diverse business lineup that lacks strong cross-business financial fit. 
D)  is sometimes an attractive option for deepening a diversified company's technological expertise and supporting a faster rate of product innovation. 
E)  is a strategy best reserved for companies in poor financial shape. 
A)  is usually the most attractive long-run strategy for a broadly diversified company confronted with recession,high interest rates,mounting competitive pressures in several of its businesses,and sluggish growth. 
B)  is directed at improving long-term performance by building stronger positions in a smaller number of core businesses. 
C)  is an attractive strategy option for revamping a diverse business lineup that lacks strong cross-business financial fit. 
D)  is sometimes an attractive option for deepening a diversified company's technological expertise and supporting a faster rate of product innovation. 
E)  is a strategy best reserved for companies in poor financial shape.

Question 10

The strategic options to improve a diversified company's overall performance do not include which of the following categories of actions?

Accepted Answer

A)  Broadening the company's business scope by making new acquisitions in new industries 
B)  Increasing dividend payments to shareholders and/or repurchasing shares of the company's stock 
C)  Restructuring the company's business lineup and putting a whole new face on the company's business makeup 
D)  Sticking closely with the existing business lineup and pursuing opportunities these businesses present 
E)  Divesting weak-performing businesses and retrenching to a narrower base of business operations 
A)  Broadening the company's business scope by making new acquisitions in new industries 
B)  Increasing dividend payments to shareholders and/or repurchasing shares of the company's stock 
C)  Restructuring the company's business lineup and putting a whole new face on the company's business makeup 
D)  Sticking closely with the existing business lineup and pursuing opportunities these businesses present 
E)  Divesting weak-performing businesses and retrenching to a narrower base of business operations

Question 11

With an unrelated diversification strategy,the types of companies that make particularly attractive acquisition targets are

Accepted Answer

A)  financially distressed companies with good turnaround potential,undervalued companies that can be acquired at a bargain price,and companies that have bright growth prospects but are short on investment capital. 
B)  companies offering the biggest potential to reduce labor costs. 
C)  cash cow businesses with excellent financial fit. 
D)  companies that are market leaders in their respective industries. 
E)  companies that are employing the same basic type of competitive strategy as the parent corporation's existing businesses. 
A)  financially distressed companies with good turnaround potential,undervalued companies that can be acquired at a bargain price,and companies that have bright growth prospects but are short on investment capital. 
B)  companies offering the biggest potential to reduce labor costs. 
C)  cash cow businesses with excellent financial fit. 
D)  companies that are market leaders in their respective industries. 
E)  companies that are employing the same basic type of competitive strategy as the parent corporation's existing businesses.

Question 12

The cost-of-entry test for evaluating whether diversification into a particular industry is likely to build shareholder value involves

Accepted Answer

A)  determining whether a newly entered business presents opportunities to cost-efficiently transfer competitively valuable skills or technology from one business to another. 
B)  determining whether the cost to enter the target industry will strain the company's credit rating. 
C)  considering whether a company's costs to enter the target industry are so high that the potentials for good profitability and return on investment are eroded. 
D)  determining whether the cost to enter the target industry will raise or lower the company's total profits. 
E)  determining whether the cost a company incurs to enter the target industry will raise or lower production costs. 
A)  determining whether a newly entered business presents opportunities to cost-efficiently transfer competitively valuable skills or technology from one business to another. 
B)  determining whether the cost to enter the target industry will strain the company's credit rating. 
C)  considering whether a company's costs to enter the target industry are so high that the potentials for good profitability and return on investment are eroded. 
D)  determining whether the cost to enter the target industry will raise or lower the company's total profits. 
E)  determining whether the cost a company incurs to enter the target industry will raise or lower production costs.

Question 13

Explain the difference between a cash cow business and a cash hog business.

Accepted Answer

The answer of Explain the difference between a cash cow...

Question 14

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 attractiveness from the standpoint of the company's long-term performance. 
B)  which industries have attractive key success factors and which industries have unattractive key success factors. 
C)  which industries have the biggest economies of scale and which industries 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 attractiveness from the standpoint of the company's long-term performance. 
B)  which industries have attractive key success factors and which industries have unattractive key success factors. 
C)  which industries have the biggest economies of scale and which industries 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 15

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 16

The most popular strategy for entering new businesses and accomplishing diversification is

Accepted Answer

A)  forming a joint venture with another company to enter the target industry. 
B)  internal start-up. 
C)  acquisition of an existing business already in the chosen industry. 
D)  forming a strategic alliance with another company to enter the target industry. 
E)  None of these;strategic alliances and joint ventures are equally popular and rank well ahead of acquisition and internal start-up in terms of frequency of use. 
A)  forming a joint venture with another company to enter the target industry. 
B)  internal start-up. 
C)  acquisition of an existing business already in the chosen industry. 
D)  forming a strategic alliance with another company to enter the target industry. 
E)  None of these;strategic alliances and joint ventures are equally popular and rank well ahead of acquisition and internal start-up in terms of frequency of use.

Question 17

The two biggest drawbacks or disadvantages of unrelated diversification are

Accepted Answer

A)  underemphasizing the importance of resource fit and the strong likelihood of diversifying into businesses that top management does not know all that much about. 
B)  insufficient cash flows to finance so many different lines of business and a lack of uniformity among the strategies of the businesses it has diversified into. 
C)  volatile sales and profits and making the mistake of diversifying into too many cash cow businesses. 
D)  the difficulties of competently managing a set of fundamentally different businesses and having a very limited competitive advantage potential that cross-business strategic fit provides. 
E)  overinvesting in the achievement of economies of scope and the difficulties of achieving a good mix of cash cow and cash hog businesses. 
A)  underemphasizing the importance of resource fit and the strong likelihood of diversifying into businesses that top management does not know all that much about. 
B)  insufficient cash flows to finance so many different lines of business and a lack of uniformity among the strategies of the businesses it has diversified into. 
C)  volatile sales and profits and making the mistake of diversifying into too many cash cow businesses. 
D)  the difficulties of competently managing a set of fundamentally different businesses and having a very limited competitive advantage potential that cross-business strategic fit provides. 
E)  overinvesting in the achievement of economies of scope and the difficulties of achieving a good mix of cash cow and cash hog businesses.

Question 18

What is meant by the term "strategic fit"? What are the advantages of pursuing strategic fit in choosing which industries to diversify into?

Accepted Answer

The answer of What is meant by the term "strategic...

Question 19

The nine-cell industry attractiveness-competitive strength matrix

Accepted Answer

A)  is useful for helping decide which businesses should have high,average,and low priorities in allocating corporate resources. 
B)  indicates which businesses are cash hogs and which are cash cows. 
C)  pinpoints what strategies are most appropriate for businesses positioned in the three top cells of the matrix but is less clear about the best strategies for businesses positioned in the bottom six cells. 
D)  identifies which sister businesses have the greatest strategic fit. 
E)  indicates the relative size of the firms businesses. 
A)  is useful for helping decide which businesses should have high,average,and low priorities in allocating corporate resources. 
B)  indicates which businesses are cash hogs and which are cash cows. 
C)  pinpoints what strategies are most appropriate for businesses positioned in the three top cells of the matrix but is less clear about the best strategies for businesses positioned in the bottom six cells. 
D)  identifies which sister businesses have the greatest strategic fit. 
E)  indicates the relative size of the firms businesses.

Question 20

A diversified company that leverages the strategic fits of its related businesses into competitive advantage

Accepted Answer

A)  has a distinctive competence in its related businesses. 
B)  has a clear path to achieving 1 + 1 = 3 synergy gains in shareholder value. 
C)  has a clear path to global market leadership in the industries where it has related businesses. 
D)  passes the value chain test and the profit expectations test for building shareholder value. 
E)  achieves economies of scope and passes the reduced-costs test for crafting a diversification strategy capable of creating added shareholder value. 
A)  has a distinctive competence in its related businesses. 
B)  has a clear path to achieving 1 + 1 = 3 synergy gains in shareholder value. 
C)  has a clear path to global market leadership in the industries where it has related businesses. 
D)  passes the value chain test and the profit expectations test for building shareholder value. 
E)  achieves economies of scope and passes the reduced-costs test for crafting a diversification strategy capable of creating added shareholder value.

A comprehensive evaluation of the group of businesses a company has diversified into involves

The value of determining the relative competitive strength of each business a company has diversified into is

Conditions that may make corporate restructuring strategies appealing include

Businesses are said to be "related" when

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?

Under what circumstances might an already diversified company chose to enter additional businesses and broaden its diversification base?

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

Economies of scope

Retrenching to a narrower diversification base

The strategic options to improve a diversified company's overall performance do not include which of the following categories of actions?

With an unrelated diversification strategy,the types of companies that make particularly attractive acquisition targets are

The cost-of-entry test for evaluating whether diversification into a particular industry is likely to build shareholder value involves

Explain the difference between a cash cow business and a cash hog business.

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

A "cash cow" type of business

The most popular strategy for entering new businesses and accomplishing diversification is

The two biggest drawbacks or disadvantages of unrelated diversification are

What is meant by the term "strategic fit"? What are the advantages of pursuing strategic fit in choosing which industries to diversify into?

The nine-cell industry attractiveness-competitive strength matrix

A diversified company that leverages the strategic fits of its related businesses into competitive advantage

Strategy, Business Models, and Competitive Advantage

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

Evaluating a Companys External Environment

Evaluating a Companys Resources, Capabilities, and Competitiveness

The Five Generic Competitive Strategies

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

Superior Strategy Execution-Another Path to Competitive Advantage

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Exam 8: Corporate Strategy: Diversification and the Multibusiness Company

A comprehensive evaluation of the group of businesses a company has diversified into involves

The value of determining the relative competitive strength of each business a company has diversified into is

Conditions that may make corporate restructuring strategies appealing include

Businesses are said to be "related" when

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?

Under what circumstances might an already diversified company chose to enter additional businesses and broaden its diversification base?

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

Economies of scope

Retrenching to a narrower diversification base

The strategic options to improve a diversified company's overall performance do not include which of the following categories of actions?

With an unrelated diversification strategy,the types of companies that make particularly attractive acquisition targets are

The cost-of-entry test for evaluating whether diversification into a particular industry is likely to build shareholder value involves

Explain the difference between a cash cow business and a cash hog business.

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

A "cash cow" type of business

The most popular strategy for entering new businesses and accomplishing diversification is

The two biggest drawbacks or disadvantages of unrelated diversification are

What is meant by the term "strategic fit"? What are the advantages of pursuing strategic fit in choosing which industries to diversify into?

The nine-cell industry attractiveness-competitive strength matrix

A diversified company that leverages the strategic fits of its related businesses into competitive advantage

Strategy, Business Models, and Competitive Advantage

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

Evaluating a Companys External Environment

Evaluating a Companys Resources, Capabilities, and Competitiveness

The Five Generic Competitive Strategies

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

Superior Strategy Execution-Another Path to Competitive Advantage

Filters