Question 1

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

Accepted Answer

A) the pool of attractive acquisition candidates in the target industry is relatively small. 
B) the firm needs better access to economies of scope in order to be cost-competitive. 
C) the industry is growing slowly and adding too much capacity too soon could create oversupply conditions. 
D) the firm has no prior experience with diversification and the industry is on the verge of explosive growth. 
E) the opportunity is too risky or complex for the company to pursue alone or when the company lacks some important resources or competencies and needs a partner to supply them. 
A) the pool of attractive acquisition candidates in the target industry is relatively small. 
B) the firm needs better access to economies of scope in order to be cost-competitive. 
C) the industry is growing slowly and adding too much capacity too soon could create oversupply conditions. 
D) the firm has no prior experience with diversification and the industry is on the verge of explosive growth. 
E) the opportunity is too risky or complex for the company to pursue alone or when the company lacks some important resources or competencies and needs a partner to supply them.

Question 2

The strategic and financial options for allocating a diversified company's financial resources do not 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) allocating resources to businesses with dim or marginal prospects. 
E) paying off existing debt,increasing dividends,building cash reserves,or repurchasing shares of the company's stock. 
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) allocating resources to businesses with dim or marginal prospects. 
E) paying off existing debt,increasing dividends,building cash reserves,or repurchasing shares of the company's stock.

Question 3

One strategic fit-based approach to related diversification would be to

Accepted Answer

A) diversify into new industries that present opportunities to combine value chain activities of two or more businesses to lower costs. 
B) diversify into those industries where the same kinds of driving forces and competitive forces prevail,thus allowing use of much the same competitive strategy in all of the businesses a company is in. 
C) acquire rival firms that have broader product lines so as to give the company access to a wider range of buyer groups. 
D) acquire companies in forward distribution channels (wholesalers and/or retailers). 
E) expand into foreign markets where the firm currently does no business. 
A) diversify into new industries that present opportunities to combine value chain activities of two or more businesses to lower costs. 
B) diversify into those industries where the same kinds of driving forces and competitive forces prevail,thus allowing use of much the same competitive strategy in all of the businesses a company is in. 
C) acquire rival firms that have broader product lines so as to give the company access to a wider range of buyer groups. 
D) acquire companies in forward distribution channels (wholesalers and/or retailers). 
E) expand into foreign markets where the firm currently does no business.

Question 4

A diversified company has a parenting advantage when it

Accepted Answer

A) is more able than other companies to create positive collaboration within its portfolio for different specialty groups and geographic locations. 
B) is more able than other companies to boost the combined performance of its individual businesses through its high-level guidance,general oversight,and other corporate-level contributions. 
C) manages a set of fundamentally similar business operations inside fundamentally similar industries and environments. 
D) avoids acquiring undervalued companies and thus reduces risks. 
E) results in supporting short-term economic shareholder value. 
A) is more able than other companies to create positive collaboration within its portfolio for different specialty groups and geographic locations. 
B) is more able than other companies to boost the combined performance of its individual businesses through its high-level guidance,general oversight,and other corporate-level contributions. 
C) manages a set of fundamentally similar business operations inside fundamentally similar industries and environments. 
D) avoids acquiring undervalued companies and thus reduces risks. 
E) results in supporting short-term economic shareholder value.

Question 5

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 6

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

Accepted Answer

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

Question 7

Divestiture can be accomplished by

Accepted Answer

A) purchasing a business outright from another company. 
B) spinning an unwanted business off as a managerially and financially independent company by selling shares to the investing public via an initial public offering of stock. 
C) purchasing a business by selling shares of stock to the investing public or borrowing funds. 
D) reinvesting in an unwanted business to make a more financially and managerially stable company. 
E) selecting only businesses that have ample resources to compete successfully on their own for sale to another company. 
A) purchasing a business outright from another company. 
B) spinning an unwanted business off as a managerially and financially independent company by selling shares to the investing public via an initial public offering of stock. 
C) purchasing a business by selling shares of stock to the investing public or borrowing funds. 
D) reinvesting in an unwanted business to make a more financially and managerially stable company. 
E) selecting only businesses that have ample resources to compete successfully on their own for sale to another company.

Question 8

Carefully explain the difference between a strategy of related diversification and a strategy of unrelated diversification.

Accepted Answer

A related diversification strategy invol

Question 9

The tests of whether a diversified company's businesses exhibit resource fit do not include

Accepted Answer

A) whether a business adequately contributes to achieving the corporate parent's performance targets. 
B) whether the excess cash flows generated by cash cow businesses are sufficient to cover the negative cash flows of its cash hog businesses. 
C) 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. 
D) whether the company has adequate financial strength to fund its different businesses and maintain a healthy credit rating. 
E) whether the corporate parent has sufficient cash to fund the needs of its individual businesses and pay dividends to shareholders without having to borrow money. 
A) whether a business adequately contributes to achieving the corporate parent's performance targets. 
B) whether the excess cash flows generated by cash cow businesses are sufficient to cover the negative cash flows of its cash hog businesses. 
C) 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. 
D) whether the company has adequate financial strength to fund its different businesses and maintain a healthy credit rating. 
E) whether the corporate parent has sufficient cash to fund the needs of its individual businesses and pay dividends to shareholders without having to borrow money.

Question 10

Identify and briefly describe the six steps involved in evaluating a diversified company's business lineup and diversification strategy.

Accepted Answer

The procedure for evaluating the pluses

Question 11

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

Accepted Answer

Candidates for divestiture in a corporat

Question 12

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 13

A company that is already diversified may choose to broaden its business scope by building positions in new related or unrelated businesses because of all of the following considerations except

Accepted Answer

A) its top management seeks to lessen the company's vulnerability to seasonal or recessionary influences or to threats from emerging new technologies,legislative regulations,and new product innovations that alter buyer preferences and resource requirements. 
B) its top management wants to increase its compensation. 
C) its top management wants to make new acquisitions to strengthen or complement some of its present businesses,market positioning,and competitive capabilities. 
D) the company's growth is sluggish and it wants the sales and profit boost that a new business can provide. 
E) it has resources or capabilities that are eminently transferable to other related or complementary businesses. 
A) its top management seeks to lessen the company's vulnerability to seasonal or recessionary influences or to threats from emerging new technologies,legislative regulations,and new product innovations that alter buyer preferences and resource requirements. 
B) its top management wants to increase its compensation. 
C) its top management wants to make new acquisitions to strengthen or complement some of its present businesses,market positioning,and competitive capabilities. 
D) the company's growth is sluggish and it wants the sales and profit boost that a new business can provide. 
E) it has resources or capabilities that are eminently transferable to other related or complementary businesses.

Question 14

Conditions that may make corporate restructuring strategies appealing include all of the following except

Accepted Answer

A) ill-chosen acquisitions that have not lived up to expectations. 
B) an excessive debt burden with interest costs that eat deeply into profitability. 
C) ongoing declines in the market shares of one or more major business units that are falling prey to more market-savvy competitors. 
D) a business lineup that consists of too many slow-growth,declining,low-margin,or competitively weak businesses. 
E) a business lineup that consists of too many cash cow businesses. 
A) ill-chosen acquisitions that have not lived up to expectations. 
B) an excessive debt burden with interest costs that eat deeply into profitability. 
C) ongoing declines in the market shares of one or more major business units that are falling prey to more market-savvy competitors. 
D) a business lineup that consists of too many slow-growth,declining,low-margin,or competitively weak businesses. 
E) a business lineup that consists of too many cash cow businesses.

Question 15

Which of the following is not generally something that ought to be considered in evaluating the attractiveness of a diversified company's business makeup?

Accepted Answer

A) market size and projected growth rate,industry profitability,and the intensity of competition 
B) industry uncertainty and business risk 
C) frequency with which strategic alliances and collaborative partnerships are used in each industry,the extent to which firms in the industry utilize outsourcing,and whether the industries a company has diversified into have common key success factors 
D) seasonal and cyclical factors,resource requirements,and whether an industry has significant social,political,regulatory,and environmental problems 
E) presence of cross-industry strategic fits 
A) market size and projected growth rate,industry profitability,and the intensity of competition 
B) industry uncertainty and business risk 
C) frequency with which strategic alliances and collaborative partnerships are used in each industry,the extent to which firms in the industry utilize outsourcing,and whether the industries a company has diversified into have common key success factors 
D) seasonal and cyclical factors,resource requirements,and whether an industry has significant social,political,regulatory,and environmental problems 
E) presence of cross-industry strategic fits

Question 16

Diversification into new industries deserves strong consideration when

Accepted Answer

A) a multibusiness company encounters enhanced market opportunities and increasing sales in its principal business 
B) a single-business company needs to develop a multiline strategy 
C) a single-business company needs to develop a corporate-wide strategy 
D) a single-business company can achieve profitable growth opportunities in its present industry 
E) a single-business company encounters diminishing market opportunities and stagnating sales in its principal business 
A) a multibusiness company encounters enhanced market opportunities and increasing sales in its principal business 
B) a single-business company needs to develop a multiline strategy 
C) a single-business company needs to develop a corporate-wide strategy 
D) a single-business company can achieve profitable growth opportunities in its present industry 
E) a single-business company encounters diminishing market opportunities and stagnating sales in its principal business

Question 17

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

Accepted Answer

A) it 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 strengths. 
B) cash cow businesses are sufficient to fund its needs to turn cash hogs into potential young stars. 
C) self-supporting stars are able to plow their cash flows into funding cash cows. 
D) each business is sufficiently profitable to generate an attractive return on invested capital. 
E) each business unit produces large internal cash flows over and above what is needed to build and maintain the business. 
A) it 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 strengths. 
B) cash cow businesses are sufficient to fund its needs to turn cash hogs into potential young stars. 
C) self-supporting stars are able to plow their cash flows into funding cash cows. 
D) each business is sufficiently profitable to generate an attractive return on invested capital. 
E) each business unit produces large internal cash flows over and above what is needed to build and maintain the business.

Question 18

What makes related diversification an attractive strategy is the

Accepted Answer

A) ability to meet the "what's in it for us?" test. 
B) potential to stabilize the company's financial performance. 
C) opportunity to convert the competitive advantage potential into 1 + 1 = 3 gains in shareholder value. 
D) potential to escape the power of buyers and suppliers. 
E) potential to more easily hurdle the barriers to entering foreign markets. 
A) ability to meet the "what's in it for us?" test. 
B) potential to stabilize the company's financial performance. 
C) opportunity to convert the competitive advantage potential into 1 + 1 = 3 gains in shareholder value. 
D) potential to escape the power of buyers and suppliers. 
E) potential to more easily hurdle the barriers to entering foreign markets.

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 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 businesses.

Question 20

What are the four main strategic paths that a diversified company can employ to improve the performance of its overall business lineup?

Accepted Answer

Strategic moves to improve a diversified

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

The strategic and financial options for allocating a diversified company's financial resources do not include

One strategic fit-based approach to related diversification would be to

A diversified company has a parenting advantage when it

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

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

Divestiture can be accomplished by

Carefully explain the difference between a strategy of related diversification and a strategy of unrelated diversification.

The tests of whether a diversified company's businesses exhibit resource fit do not include

Identify and briefly describe the six steps involved in evaluating a diversified company's business lineup and diversification strategy.

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

A cash cow type of business

A company that is already diversified may choose to broaden its business scope by building positions in new related or unrelated businesses because of all of the following considerations except

Conditions that may make corporate restructuring strategies appealing include all of the following except

Which of the following is not generally something that ought to be considered in evaluating the attractiveness of a diversified company's business makeup?

Diversification into new industries deserves strong consideration when

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

What makes related diversification an attractive strategy is the

The Nine-Cell Industry Attractiveness-Competitive Strength Matrix

What are the four main strategic paths that a diversified company can employ to improve the performance of its overall business lineup?

Strategy,business Models,and Competitive Advantage

Strategy Formulation,execution,and Governance

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 Executionanother Path to Competitive Advantage

Filters

Exam 8: Corporate Strategy: Diversification and the Multibusiness Company

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

The strategic and financial options for allocating a diversified company's financial resources do not include

One strategic fit-based approach to related diversification would be to

A diversified company has a parenting advantage when it

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

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

Divestiture can be accomplished by

Carefully explain the difference between a strategy of related diversification and a strategy of unrelated diversification.

The tests of whether a diversified company's businesses exhibit resource fit do not include

Identify and briefly describe the six steps involved in evaluating a diversified company's business lineup and diversification strategy.

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

A cash cow type of business

A company that is already diversified may choose to broaden its business scope by building positions in new related or unrelated businesses because of all of the following considerations except

Conditions that may make corporate restructuring strategies appealing include all of the following except

Which of the following is not generally something that ought to be considered in evaluating the attractiveness of a diversified company's business makeup?

Diversification into new industries deserves strong consideration when

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

What makes related diversification an attractive strategy is the

The Nine-Cell Industry Attractiveness-Competitive Strength Matrix

What are the four main strategic paths that a diversified company can employ to improve the performance of its overall business lineup?

Strategy,business Models,and Competitive Advantage

Strategy Formulation,execution,and Governance

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 Executionanother Path to Competitive Advantage

Filters