Question 1

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 2

The procedure for evaluating the pluses and minuses of a diversified company's strategy includes

Accepted Answer

A)  assessing the attractiveness of the industries the company has diversified into. 
B)  assessing the competitive strength of each business the company has diversified into. 
C)  ranking the performance prospects of the various businesses from best to worst and determining the priorities for resource allocation. 
D)  evaluating the extent of cross-business strategic fits and also checking whether the firm's resources fit the needs of the various businesses the company has diversified into. 
E)  All of these. 
A)  assessing the attractiveness of the industries the company has diversified into. 
B)  assessing the competitive strength of each business the company has diversified into. 
C)  ranking the performance prospects of the various businesses from best to worst and determining the priorities for resource allocation. 
D)  evaluating the extent of cross-business strategic fits and also checking whether the firm's resources fit the needs of the various businesses the company has diversified into. 
E)  All of these.

Question 3

The attractiveness test for evaluating whether diversification into a particular industry is likely to build shareholder value involves determining whether

Accepted Answer

A)  conditions in the target industry allow for profits and return on investment that is equal to or better than that of the company's present business(es). 
B)  the potential diversification move will boost the company's competitive advantage in its existing business. 
C)  shareholders will view the contemplated diversification move as attractive. 
D)  key success factors in the target industry are attractive. 
E)  there are attractive strategic fits between the value chains of the company's present businesses and the value chain of the new business it is considering entering. 
A)  conditions in the target industry allow for profits and return on investment that is equal to or better than that of the company's present business(es). 
B)  the potential diversification move will boost the company's competitive advantage in its existing business. 
C)  shareholders will view the contemplated diversification move as attractive. 
D)  key success factors in the target industry are attractive. 
E)  there are attractive strategic fits between the value chains of the company's present businesses and the value chain of the new business it is considering entering.

Question 4

The basic premise of unrelated diversification is that

Accepted Answer

A)  the least risky way to diversify is to seek out businesses that are leaders in their respective industry. 
B)  the best companies to acquire are those that offer the greatest economies of scope rather than the greatest economies of scale. 
C)  the best way to build shareholder value is to acquire businesses with strong cross-business financial fit. 
D)  any company that can be acquired on good financial terms and that has satisfactory growth and earnings potential represents a good acquisition and a good business opportunity. 
E)  the task of building shareholder value is better served by seeking to stabilize earnings across the entire business cycle than by seeking to capture cross-business strategic fits. 
A)  the least risky way to diversify is to seek out businesses that are leaders in their respective industry. 
B)  the best companies to acquire are those that offer the greatest economies of scope rather than the greatest economies of scale. 
C)  the best way to build shareholder value is to acquire businesses with strong cross-business financial fit. 
D)  any company that can be acquired on good financial terms and that has satisfactory growth and earnings potential represents a good acquisition and a good business opportunity. 
E)  the task of building shareholder value is better served by seeking to stabilize earnings across the entire business cycle than by seeking to capture cross-business strategic fits.

Question 5

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 6

The two biggest drawbacks or disadvantages of unrelated diversification are

Accepted Answer

A)  the difficulties of passing the cost-of-entry test and the ease with which top managers can make the mistake of diversifying into businesses where competition is too intense. 
B)  the difficulties of capturing financial fit and having insufficient financial resources to spread business risk across many different lines of business. 
C)  demanding managerial requirements and limited competitive advantage potential that cross-business strategic fit provides. 
D)  Ending up with too many cash hog businesses and too much diversity among the competitive strategies of the businesses it has diversified into. 
E)  the difficulties of achieving economies of scope and conflicts/incompatibility among the competitive strategies of the company's different businesses. 
A)  the difficulties of passing the cost-of-entry test and the ease with which top managers can make the mistake of diversifying into businesses where competition is too intense. 
B)  the difficulties of capturing financial fit and having insufficient financial resources to spread business risk across many different lines of business. 
C)  demanding managerial requirements and limited competitive advantage potential that cross-business strategic fit provides. 
D)  Ending up with too many cash hog businesses and too much diversity among the competitive strategies of the businesses it has diversified into. 
E)  the difficulties of achieving economies of scope and conflicts/incompatibility among the competitive strategies of the company's different businesses.

Question 7

Which one of the following is not one of the elements of crafting corporate strategy for a diversified company?

Accepted Answer

A)  Picking new industries to enter and deciding on the means of entry 
B)  Choosing the appropriate value chain for each business the company has entered 
C)  Pursuing opportunities to leverage cross-business value chain relationships and strategic fits into competitive advantage 
D)  Steering corporate resources into the most attractive business units 
E)  Initiating actions to boost the combined performance of the businesses the firm has entered 
A)  Picking new industries to enter and deciding on the means of entry 
B)  Choosing the appropriate value chain for each business the company has entered 
C)  Pursuing opportunities to leverage cross-business value chain relationships and strategic fits into competitive advantage 
D)  Steering corporate resources into the most attractive business units 
E)  Initiating actions to boost the combined performance of the businesses the firm has entered

Question 8

The attractiveness test is the most important test for determining whether diversification into a new business is likely to result in 1 + 1 = 3 increases in shareholder value (as opposed to simply a 1 + 1 = 2 type of increase).True or false? Justify and explain your answer.

Accepted Answer

The answer of The attractiveness test is the most important...

Question 9

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

Accepted Answer

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

Question 10

Acquisition of an existing business is an attractive strategy option for entering a promising new industry because it

Accepted Answer

A)  is an effective way to hurdle entry barriers,is usually quicker than trying to launch a new start-up operation,and allows the acquirer to move directly to the task of building a strong position in the target industry. 
B)  is less expensive than launching a new start-up operation,thus passing the cost-of-entry test. 
C)  is a less risky way of passing the attractiveness test. 
D)  is more likely to result in passing the shareholder value test,the profitability test,and the better-off test. 
E)  offers the prospect of gaining an immediate competitive advantage in the new industry and thus helps ensure that the diversification move will pass the competitive advantage test for building shareholder value. 
A)  is an effective way to hurdle entry barriers,is usually quicker than trying to launch a new start-up operation,and allows the acquirer to move directly to the task of building a strong position in the target industry. 
B)  is less expensive than launching a new start-up operation,thus passing the cost-of-entry test. 
C)  is a less risky way of passing the attractiveness test. 
D)  is more likely to result in passing the shareholder value test,the profitability test,and the better-off test. 
E)  offers the prospect of gaining an immediate competitive advantage in the new industry and thus helps ensure that the diversification move will pass the competitive advantage test for building shareholder value.

Question 11

Assessments of how a diversified company's subsidiaries compare in competitive strength should be based on such factors as

Accepted Answer

A)  vulnerability to seasonal and cyclical downturns,vulnerability to driving forces,and vulnerability to fluctuating interest rates and exchange rates. 
B)  relative market share,ability to match or beat rivals on key product attributes,brand image and reputation,costs relative to competitors,and ability to benefit from strategic fits with sister businesses. 
C)  the appeal of its strategy,relative number of competitive capabilities,the number of products in each businesses product line,which businesses have the highest/lowest market shares,and which businesses earn the highest/lowest profits before taxes. 
D)  the ability to hurdle barriers to entry,value chain attractiveness,and business risk. 
E)  cost reduction potential,customer satisfaction potential,and comparisons of annual cash flows from operations. 
A)  vulnerability to seasonal and cyclical downturns,vulnerability to driving forces,and vulnerability to fluctuating interest rates and exchange rates. 
B)  relative market share,ability to match or beat rivals on key product attributes,brand image and reputation,costs relative to competitors,and ability to benefit from strategic fits with sister businesses. 
C)  the appeal of its strategy,relative number of competitive capabilities,the number of products in each businesses product line,which businesses have the highest/lowest market shares,and which businesses earn the highest/lowest profits before taxes. 
D)  the ability to hurdle barriers to entry,value chain attractiveness,and business risk. 
E)  cost reduction potential,customer satisfaction potential,and comparisons of annual cash flows from operations.

Question 12

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 13

Under what circumstances might a diversified firm choose to divest one of its businesses?

Accepted Answer

The answer of Under what circumstances might a diversified firm...

Question 14

Identify and briefly discuss each of the three options for entering new businesses.Which one is the most popular in the sense of being used most frequently?

Accepted Answer

The three options for entering new busin

Question 15

Which of the following is an important appeal of a related diversification strategy?

Accepted Answer

A)  Represents an effective way of capturing valuable financial fit benefits 
B)  Offers opportunities to transfer skills,expertise,technical know-how,or other capabilities from one business to another 
C)  Offers significant opportunities to strongly differentiate a company's product offerings from those of rivals 
D)  Is more likely to pass the cost-of-entry test and the capital gains test than unrelated diversification 
E)  Is typically more profitable than unrelated diversification,which is a major factor in helping related diversification pass the attractiveness test 
A)  Represents an effective way of capturing valuable financial fit benefits 
B)  Offers opportunities to transfer skills,expertise,technical know-how,or other capabilities from one business to another 
C)  Offers significant opportunities to strongly differentiate a company's product offerings from those of rivals 
D)  Is more likely to pass the cost-of-entry test and the capital gains test than unrelated diversification 
E)  Is typically more profitable than unrelated diversification,which is a major factor in helping related diversification pass the attractiveness test

Question 16

Identify and explain the meaning and strategic significance of each of the following terms:
a)Related diversification
b)Strategic fit
c)Economies of scope
d)Retrenching
e)Unrelated diversification

Accepted Answer

The answer of Identify and explain the meaning and strategic...

Question 17

The best place to look for cross-business strategic fits is

Accepted Answer

A)  in R&D and technology activities. 
B)  in supply chain activities. 
C)  in sales and marketing activities. 
D)  in production and distribution activities. 
E)  anywhere along the respective value chains of related businesses-no one place is best. 
A)  in R&D and technology activities. 
B)  in supply chain activities. 
C)  in sales and marketing activities. 
D)  in production and distribution activities. 
E)  anywhere along the respective value chains of related businesses-no one place is best.

Question 18

A diversified company's business units exhibit good resource fit when

Accepted Answer

A)  each business is a cash cow. 
B)  a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin and when individual businesses add to a company's overall resource strengths. 
C)  each business is sufficiently profitable to generate an attractive return on invested capital. 
D)  each business unit produces large internal cash flows over and above what is needed to build and maintain the business. 
E)  the resource requirements of each business exactly match the resources the company has available. 
A)  each business is a cash cow. 
B)  a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin and when individual businesses add to a company's overall resource strengths. 
C)  each business is sufficiently profitable to generate an attractive return on invested capital. 
D)  each business unit produces large internal cash flows over and above what is needed to build and maintain the business. 
E)  the resource requirements of each business exactly match the resources the company has available.

Question 19

A diversified company has a good financial fit when the excess cash generated by its

Accepted Answer

A)  cash cow businesses is sufficient to fund the needs of its cash hog businesses. 
B)  cash cow businesses is sufficient to fund its needs to turn into potential young stars. 
C)  self-supporting stars use their cash flow to fund cash cows. 
D)  cash hog businesses is sufficient to fund the needs of its cash cow businesses. 
E)  potential young stars is sufficient to help stars. 
A)  cash cow businesses is sufficient to fund the needs of its cash hog businesses. 
B)  cash cow businesses is sufficient to fund its needs to turn into potential young stars. 
C)  self-supporting stars use their cash flow to fund cash cows. 
D)  cash hog businesses is sufficient to fund the needs of its cash cow businesses. 
E)  potential young stars is sufficient to help stars.

Question 20

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

Accepted Answer

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

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

The procedure for evaluating the pluses and minuses of a diversified company's strategy includes

The attractiveness test for evaluating whether diversification into a particular industry is likely to build shareholder value involves determining whether

The basic premise of unrelated diversification is that

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

The two biggest drawbacks or disadvantages of unrelated diversification are

Which one of the following is not one of the elements of crafting corporate strategy for a diversified company?

The attractiveness test is the most important test for determining whether diversification into a new business is likely to result in 1 + 1 = 3 increases in shareholder value (as opposed to simply a 1 + 1 = 2 type of increase).True or false? Justify and explain your answer.

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

Acquisition of an existing business is an attractive strategy option for entering a promising new industry because it

Assessments of how a diversified company's subsidiaries compare in competitive strength should be based on such factors as

Diversification merits strong consideration whenever a single-business company

Under what circumstances might a diversified firm choose to divest one of its businesses?

Identify and briefly discuss each of the three options for entering new businesses.Which one is the most popular in the sense of being used most frequently?

Which of the following is an important appeal of a related diversification strategy?

Identify and explain the meaning and strategic significance of each of the following terms: a)Related diversification b)Strategic fit c)Economies of scope d)Retrenching e)Unrelated diversification

The best place to look for cross-business strategic fits is

A diversified company's business units exhibit good resource fit when

A diversified company has a good financial fit when the excess cash generated by its

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

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

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

The procedure for evaluating the pluses and minuses of a diversified company's strategy includes

The attractiveness test for evaluating whether diversification into a particular industry is likely to build shareholder value involves determining whether

The basic premise of unrelated diversification is that

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

The two biggest drawbacks or disadvantages of unrelated diversification are

Which one of the following is not one of the elements of crafting corporate strategy for a diversified company?

The attractiveness test is the most important test for determining whether diversification into a new business is likely to result in 1 + 1 = 3 increases in shareholder value (as opposed to simply a 1 + 1 = 2 type of increase).True or false? Justify and explain your answer.

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

Acquisition of an existing business is an attractive strategy option for entering a promising new industry because it

Assessments of how a diversified company's subsidiaries compare in competitive strength should be based on such factors as

Diversification merits strong consideration whenever a single-business company

Under what circumstances might a diversified firm choose to divest one of its businesses?

Identify and briefly discuss each of the three options for entering new businesses.Which one is the most popular in the sense of being used most frequently?

Which of the following is an important appeal of a related diversification strategy?

Identify and explain the meaning and strategic significance of each of the following terms: a)Related diversification b)Strategic fit c)Economies of scope d)Retrenching e)Unrelated diversification

The best place to look for cross-business strategic fits is

A diversified company's business units exhibit good resource fit when

A diversified company has a good financial fit when the excess cash generated by its

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

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