Question 1

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 2

As a rule,all the industries represented in a diversified company's business portfolio should be judged on such attractiveness factors as

Accepted Answer

A)  market size and projected growth rate. 
B)  emerging opportunities and threats,the intensity of competition,and the degree of industry uncertainty and business risk. 
C)  resource requirements and the presence of cross-industry strategic fits. 
D)  seasonal and cyclical factors,industry profitability,and whether an industry has significant social,political,regulatory,and environmental problems. 
E)  All of these. 
A)  market size and projected growth rate. 
B)  emerging opportunities and threats,the intensity of competition,and the degree of industry uncertainty and business risk. 
C)  resource requirements and the presence of cross-industry strategic fits. 
D)  seasonal and cyclical factors,industry profitability,and whether an industry has significant social,political,regulatory,and environmental problems. 
E)  All of these.

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 create economic value 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 create economic value 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

Question 4

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 5

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

Accepted Answer

A)  The ability to spread business risk over truly diverse businesses (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)  Superior top management ability 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 companies with big upside profit potential 
A)  The ability to spread business risk over truly diverse businesses (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)  Superior top management ability 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 companies with big upside profit potential

Question 6

Management's ranking of business units and establishing a priority for resource allocation should

Accepted Answer

A)  utilize activity-based costing and benchmarking to determine the funding needs of each business unit. 
B)  first consider the strength of funding proposals presented by managers of each division or business unit. 
C)  give priority for funding to cash hog businesses. 
D)  put business units with the brightest profit and growth prospects and solid strategic and resource fits at the top of the investment priority list. 
E)  always make the company's business units with strong resource strengths and competitive capabilities the central focus of funding initiatives. 
A)  utilize activity-based costing and benchmarking to determine the funding needs of each business unit. 
B)  first consider the strength of funding proposals presented by managers of each division or business unit. 
C)  give priority for funding to cash hog businesses. 
D)  put business units with the brightest profit and growth prospects and solid strategic and resource fits at the top of the investment priority list. 
E)  always make the company's business units with strong resource strengths and competitive capabilities the central focus of funding initiatives.

Question 7

A company that is already diversified may choose to broaden its business base by building positions in new related or unrelated businesses because

Accepted Answer

A)  it has resources or capabilities that are eminently transferable to other related or complementary businesses. 
B)  the company's growth is sluggish and it needs the sales and profit boost that a new business can provide. 
C)  management wants to lessen the company's vulnerability to seasonal or recessionary influences. 
D)  unfavorable driving forces face the company's core business. 
E)  All of these. 
A)  it has resources or capabilities that are eminently transferable to other related or complementary businesses. 
B)  the company's growth is sluggish and it needs the sales and profit boost that a new business can provide. 
C)  management wants to lessen the company's vulnerability to seasonal or recessionary influences. 
D)  unfavorable driving forces face the company's core business. 
E)  All of these.

Question 8

Which one of the following is not a reasonable option for deploying a diversified company's financial resources?

Accepted Answer

A)  Making acquisitions to establish positions in new businesses or to complement existing businesses 
B)  Concentrating most of a company's financial resources in cash cow businesses and allocating little or no additional resources to cash hog businesses until they show enough strength to generate positive cash flows 
C)  Funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses 
D)  Paying down existing debt,increasing dividends,or repurchasing shares of the company's stock 
E)  Investing in ways to strengthen or grow existing businesses 
A)  Making acquisitions to establish positions in new businesses or to complement existing businesses 
B)  Concentrating most of a company's financial resources in cash cow businesses and allocating little or no additional resources to cash hog businesses until they show enough strength to generate positive cash flows 
C)  Funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses 
D)  Paying down existing debt,increasing dividends,or repurchasing shares of the company's stock 
E)  Investing in ways to strengthen or grow existing businesses

Question 9

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

Accepted Answer

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

Question 10

Moves to improve a diversified company's overall performance include

Accepted Answer

A)  broadening the company's business scope by making new acquisitions in new industries. 
B)  divesting weak-performing businesses and retrenching to a narrower base of business operations. 
C)  restructuring the company's business lineup and putting a whole new face on the company's business makeup. 
D)  sticking closely to the existing business lineup and pursuing the growth opportunities presented by these businesses. 
E)  All of these. 
A)  broadening the company's business scope by making new acquisitions in new industries. 
B)  divesting weak-performing businesses and retrenching to a narrower base of business operations. 
C)  restructuring the company's business lineup and putting a whole new face on the company's business makeup. 
D)  sticking closely to the existing business lineup and pursuing the growth opportunities presented by these businesses. 
E)  All of these.

Question 11

Checking a diversified firm's business portfolio for the competitive advantage potential of cross-business strategic fits entails consideration of

Accepted Answer

A)  whether the parent company's competitive advantages are being deployed to maximum advantage in each of its business units. 
B)  whether the competitive strategies employed in each business act to reinforce the competitive power of the strategies employed in the company's other businesses. 
C)  whether the competitive strategies in each business possess good strategic fit with the parent company's corporate strategy. 
D)  the extent to which there are competitively valuable relationships between the value chains of sister business units and what opportunities they present to reduce costs,share use of a potent brand name,or transfer skills or technology or intellectual capital from one business to another. 
E)  how compatible the competitive strategies of the various sister businesses are and whether these strategies are properly aimed at achieving the same kind of competitive advantage. 
A)  whether the parent company's competitive advantages are being deployed to maximum advantage in each of its business units. 
B)  whether the competitive strategies employed in each business act to reinforce the competitive power of the strategies employed in the company's other businesses. 
C)  whether the competitive strategies in each business possess good strategic fit with the parent company's corporate strategy. 
D)  the extent to which there are competitively valuable relationships between the value chains of sister business units and what opportunities they present to reduce costs,share use of a potent brand name,or transfer skills or technology or intellectual capital from one business to another. 
E)  how compatible the competitive strategies of the various sister businesses are and whether these strategies are properly aimed at achieving the same kind of competitive advantage.

Question 12

The task of crafting 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 fits into competitive advantage. 
D)  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 fits into competitive advantage. 
D)  steering corporate resources into the most attractive business units. 
E)  All of these.

Question 13

The one factor that is not relevant for company managers to worry about when their company has many unrelated firms,especially when they are very diverse is to

Accepted Answer

A)  stay abreast of what's happening in each industry and subsidiary. 
B)  pick business-unit heads having requisite combination of managerial skills and know-how to motivate people. 
C)  understand the true value of strategic investment proposals by business-unit managers. 
D)  know what to do if a business unit stumbles. 
E)  rely on the skills and expertise of business-level managers to build competitive advantage. 
A)  stay abreast of what's happening in each industry and subsidiary. 
B)  pick business-unit heads having requisite combination of managerial skills and know-how to motivate people. 
C)  understand the true value of strategic investment proposals by business-unit managers. 
D)  know what to do if a business unit stumbles. 
E)  rely on the skills and expertise of business-level managers to build competitive advantage.

Question 14

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. 
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.

Question 15

The success of unrelated diversification is dependent upon management's ability to

Accepted Answer

A)  acquire new businesses that utilize much the same technology as existing businesses. 
B)  divest businesses whose competitive strategies do not match the overall competitive strategy of the corporation. 
C)  acquire new businesses having attractive distribution-related and customer-related strategic fits with existing businesses. 
D)  spotting bargain-priced companies with big upside potential and then turning around their operations quickly with the aid of the parent company's financial resources and managerial know-how. 
E)  identify potential new acquisition candidates that are cash cows (as opposed to cash hogs). 
A)  acquire new businesses that utilize much the same technology as existing businesses. 
B)  divest businesses whose competitive strategies do not match the overall competitive strategy of the corporation. 
C)  acquire new businesses having attractive distribution-related and customer-related strategic fits with existing businesses. 
D)  spotting bargain-priced companies with big upside potential and then turning around their operations quickly with the aid of the parent company's financial resources and managerial know-how. 
E)  identify potential new acquisition candidates that are cash cows (as opposed to cash hogs).

Question 16

When evaluating strategic fit benefits that related diversification can deliver one must keep in consideration a number of factors.Which one is not relevant?

Accepted Answer

A)  Shareholder value stemming from a diversified business cannot be replicated by simply owning a diversified portfolio of stocks. 
B)  The capture of cross-business strategic fits benefits is possible only through related diversification. 
C)  Cross-business strategic fit benefits is not automatically realized;the benefits materialize only after management has successfully pursued internal actions to capture them. 
D)  Shareholder value is created when the diversified company's profitability exceeds expectations. 
E)  Related diversification is the process of holding the stock of many businesses in a portfolio. 
A)  Shareholder value stemming from a diversified business cannot be replicated by simply owning a diversified portfolio of stocks. 
B)  The capture of cross-business strategic fits benefits is possible only through related diversification. 
C)  Cross-business strategic fit benefits is not automatically realized;the benefits materialize only after management has successfully pursued internal actions to capture them. 
D)  Shareholder value is created when the diversified company's profitability exceeds expectations. 
E)  Related diversification is the process of holding the stock of many businesses in a portfolio.

Question 17

Cross-business strategic fits can be found

Accepted Answer

A)  in unrelated as well as related businesses and in the markets of foreign countries as well as in domestic markets. 
B)  only in businesses whose products/services satisfy the same general types of buyer needs and preferences. 
C)  mainly in either technology-related activities or sales and marketing activities. 
D)  chiefly in the R&D portions of the value chains of unrelated businesses. 
E)  anywhere along the respective value chains of related businesses. 
A)  in unrelated as well as related businesses and in the markets of foreign countries as well as in domestic markets. 
B)  only in businesses whose products/services satisfy the same general types of buyer needs and preferences. 
C)  mainly in either technology-related activities or sales and marketing activities. 
D)  chiefly in the R&D portions of the value chains of unrelated businesses. 
E)  anywhere along the respective value chains of related businesses.

Question 18

Which one of the following is not part of the task of checking a diversified company's business lineup for adequate resource fit?

Accepted Answer

A)  Determining whether the excess cash flows generated by cash cow businesses are sufficient to cover the negative cash flows of its cash hog businesses 
B)  Determining whether recently acquired businesses are acting to strengthen a company's resource base and competitive capabilities or whether they are causing its competitive and managerial resources to be stretched too thinly 
C)  Determining whether business units offer opportunities to transfer skills or technology or intellectual capital from one business to another 
D)  Determining whether the company has adequate financial strength to fund its different businesses and maintain a healthy credit rating 
E)  Determining whether the corporate parent has or can develop sufficient resource strengths and competitive capabilities to be successful in each of the businesses it has diversified into 
A)  Determining whether the excess cash flows generated by cash cow businesses are sufficient to cover the negative cash flows of its cash hog businesses 
B)  Determining whether recently acquired businesses are acting to strengthen a company's resource base and competitive capabilities or whether they are causing its competitive and managerial resources to be stretched too thinly 
C)  Determining whether business units offer opportunities to transfer skills or technology or intellectual capital from one business to another 
D)  Determining whether the company has adequate financial strength to fund its different businesses and maintain a healthy credit rating 
E)  Determining whether the corporate parent has or can develop sufficient resource strengths and competitive capabilities to be successful in each of the businesses it has diversified into

Question 19

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 20

Different businesses are said to be "unrelated" when

Accepted Answer

A)  they are in different industries. 
B)  the products of the different businesses are not bought by the same types of buyers or sold in the same types of retail stores. 
C)  the products of the different businesses satisfy different buyer needs. 
D)  the businesses have different supply chains and different types of suppliers. 
E)  there is an absence of competitively valuable strategic fits between their respective value chains. 
A)  they are in different industries. 
B)  the products of the different businesses are not bought by the same types of buyers or sold in the same types of retail stores. 
C)  the products of the different businesses satisfy different buyer needs. 
D)  the businesses have different supply chains and different types of suppliers. 
E)  there is an absence of competitively valuable strategic fits between their respective value chains.

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

As a rule,all the industries represented in a diversified company's business portfolio should be judged on such attractiveness factors as

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

To create value for shareholders via diversification,a company must

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

Management's ranking of business units and establishing a priority for resource allocation should

A company that is already diversified may choose to broaden its business base by building positions in new related or unrelated businesses because

Which one of the following is not a reasonable option for deploying a diversified company's financial resources?

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

Moves to improve a diversified company's overall performance include

Checking a diversified firm's business portfolio for the competitive advantage potential of cross-business strategic fits entails consideration of

The task of crafting corporate strategy for a diversified company encompasses

The one factor that is not relevant for company managers to worry about when their company has many unrelated firms,especially when they are very diverse is to

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

The success of unrelated diversification is dependent upon management's ability to

When evaluating strategic fit benefits that related diversification can deliver one must keep in consideration a number of factors.Which one is not relevant?

Cross-business strategic fits can be found

Which one of the following is not part of the task of checking a diversified company's business lineup for adequate resource fit?

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?

Different businesses are said to be "unrelated" when

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

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

As a rule,all the industries represented in a diversified company's business portfolio should be judged on such attractiveness factors as

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

To create value for shareholders via diversification,a company must

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

Management's ranking of business units and establishing a priority for resource allocation should

A company that is already diversified may choose to broaden its business base by building positions in new related or unrelated businesses because

Which one of the following is not a reasonable option for deploying a diversified company's financial resources?

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

Moves to improve a diversified company's overall performance include

Checking a diversified firm's business portfolio for the competitive advantage potential of cross-business strategic fits entails consideration of

The task of crafting corporate strategy for a diversified company encompasses

The one factor that is not relevant for company managers to worry about when their company has many unrelated firms,especially when they are very diverse is to

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

The success of unrelated diversification is dependent upon management's ability to

When evaluating strategic fit benefits that related diversification can deliver one must keep in consideration a number of factors.Which one is not relevant?

Cross-business strategic fits can be found

Which one of the following is not part of the task of checking a diversified company's business lineup for adequate resource fit?

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?

Different businesses are said to be "unrelated" when

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