Exam 9: Diversifying, Acquiring, and Restructuring

You should understand that the nature of your industry might call for diversification, acquisitions, and restructuring.

Which is true of relatedness? a. Measurement of product relatedness is no longer debatable. b. A "product-related" firm will be considered related regardless of the measure used. c. Some argue that product relatedness refers specifically to the visible product linkages. d. Relatedness can be a common underlying dominant logic that connects various businesses in a diversified firm. e. Product-unrelated conglomerates are not linked by institutional relatedness.

Porter's five forces model can be used in regards to the structural attractiveness of an industry.

Not all product-related diversifiers outperform product-unrelated diversifiers.

You and your firm need to develop policies that avoid acquisitions and restructuring.

Diversification can pay off in all of the following situations except: a. Risk is spread over several product or country) markets. b. Core resources are leveraged. c. The art of post-acquisition integration has been mastered. d. Commonly shared industry skills are used. e. Firms are organized to minimize the costs.

To ensure the success of the M&A, managers need to make sure of all the following except: a. Be willing to walk out when premiums are too high. b. Engage in adequate due diligence concerning strategic fit. c. Seek organizational contrast and variety rather than organizational fit. d. Address the concerns of multiple stakeholders. e. Recognize that that integration management is a fulltime job.

Select the best choice: a company that is engaged in oil production, pipelines and tankers, refining, and gasoline stations has engaged in ______________ expansion. a. Horizontal b. Vertical c. Conglomerate d. Friendly M&A e. Hostile M&A

When conglomerate units are better off competing as stand-alone entities, we call it diversification premium.

You are the CEO of Mega Global Corporation and you are weighing a number of decisions involving diversification, acquisition, and restructuring. Long ago you were the manager of a mutual fund and you decide to make your decisions using the same approach as you used in managing that fund. How would that affect your decisions and decision process?

In that same blog another person stated: "Decisions about diversification and acquisition are not based on the well being of the shareholder but instead on the needs of the CEO such as ego and job security. As a result, all such decisions should be submitted to a government agency for approval." Do you agree? Why or why not?

Porter's five forces affect the structural attractiveness of an industry.

The scope of the firm is thus determined by a comparison between MEB and MBC.

Sources of operational synergy include: a. Technologies. b. Marketing. c. Manufacturing. d. All of the above. e. None of the above.

Which is not true regarding geographic diversification and firm performance? a. U-shaped relationship at low level of internationalization. b. Initially a negative effect of international expansion on performance. c. Affected by the liability of foreignness. d. Inverted-U shape at moderate to high levels of internationalization. e. Positive only at high levels of internationalization.

Sources of operation synergy: a. Technologies. b. Marketing. c. Manufacturing. d. All of the above. e. None of the above.

The economic benefits of the last unit of growth such as the last acquisition) can be defined as MBC.

Which is true regarding restructuring? a. There are two primary ways of restructuring namely downsizing and upsizing. b. A rising level of competition within an industry normally prevents restructuring. c. Corporate restructuring is not widely embraced around the world. d. Restructuring is one of the first things to consider when trying to improve profitability. e. Restructuring is easier in knowledge-intensive firms than capital intensive firms.

Which would be more characteristic of conglomerates? a. "Putting one's eggs in one basket." b. "Putting one's eggs in similar baskets." c. "Putting one's eggs in different baskets." d. A and B above. e. B and C above.

Corporate scope is shaped by: a. Industry conditions. b. Firm capabilities. c. Institutional constraints. d. Opportunities in both developed and emerging economies. e. All of the above.