Deck 6: Corporate Strategy

Question 1

The search for competitive advantage within a single industry, market, or line of business best defines the term _____.

A) complementary service strategy
B) corporate strategy
C) business unit strategy
D) cost advantage strategy

Answer 1

C

Question 2

Virgo Inc.earns less than 70 percent of its revenue from manufacturing computers.It recently started manufacturing tablets.The company made use of existing technology and materials and decided to distribute the tablets through the same distributors used for its computers.In this scenario, Virgo Inc.chose _____.

A) related-constrained diversification
B) related-linked diversification
C) unrelated-constrained diversification
D) unrelated-linked diversification

Answer 2

A

Question 3

Which of the following is a defining feature of firms that practice related-constrained diversification?

A) They earn more than 70 percent of their revenues from their main line of business and the rest from businesses located along the value chain.
B) They earn less than 70 percent of their revenues from their main line of business and their other lines of business share product, technological, and distribution linkages with the main business.
C) They operate in related markets, but fewer linkages exist between the new and existing markets than the elements create separately.
D) They earn more than 95 percent of the revenues from a single line of business.

Answer 3

B

Question 4

Pisces Corp.is an apparel manufacturing company.It purchased a few of its raw material suppliers and set up their factories close to the clothing stores so that the company does not have to invest on transportation charges.This is an example of _____.

A) downward diversification
B) forward integration
C) backward integration
D) horizontal diversification

Question 5

Which of the following is an example of a horizontal diversification?

A) A new company selling a new product in the market
B) An old company increasing its supply of existing products
C) A company acquiring its raw materials from many parts of the world
D) A new company trying to reintroduce an old product with improved advertising tactics

Question 6

Saturn Inc.is an e-commerce company that sells home appliances.The firm recently started selling its line of packaged food items online.In this scenario, Saturn Inc.chose _____.

A) unrelated-linked diversification
B) related-constrained diversification
C) unrelated-constrained diversification
D) related-linked diversification

Question 7

Which of the following statements is true of a dominant vertical business?

A) It earns less than 70 percent of its revenue from its main line of business.
B) It earns more than 95 percent of revenue from its main line of business.
C) It earns 30 percent of its revenue from business lines across different value chains.
D) It earns 30 percent of its revenue from businesses located along the value chain.

Question 8

Sparkle LLC, a beverage industry, earns almost all of its profits only by selling beverages.Sparkle LLC can be best categorized as a _____.

A) single business
B) diversified business
C) dominant vertical business
D) dominant business

Question 9

Venus Inc.is a large firm that sells several healthcare products such as bathing soaps, shampoos, body creams, and baby products.Each of these products has its own customer base.Individually, each of these products has upheld unique approaches to establish and maintain competitive advantage over its own rival companies that sell similar products.Which of the following strategies does Venus Inc.use for its products?

A) Business unit strategy
B) Global marketing strategy
C) Corporate strategy
D) Economic spending strategy

Question 10

A dominant vertical business differs from a dominant business in that a dominant business:

A) earns 30 percent of its revenue from businesses located along the value chain of its main line of business.
B) earns 30 percent of its revenue from business lines across different value chains.
C) earns less than 70 percent of its revenue from its main line of business.
D) earns more than 95 percent of its revenue from its main line of business.

Question 11

Markus United Inc., a soap manufacturing company, maintained strategic advantage over other companies by retaining profits in a unique way.The company bought a few distributors in order to improve efficiency and cut down transportation costs while distributing its products to retail stores.The company generated more profits than its competitors this way.This is an example of _____.

A) horizontal diversification
B) backward integration
C) forward integration
D) horizontal specialization

Question 12

Brentwood Industries, a furniture company, bought a supplier factory that creates raw materials for the whole range of products Brentwood manufactures.Brentwood has made sure not to look for outside sources for providing the company's raw materials.Brentwood Industries is practicing _____.

A) market penetration
B) unrelated diversification
C) vertical integration
D) horizontal diversification

Question 13

Movement into adjacent markets by a firm along its own value chain can be best termed _____.

A) vertical integration
B) horizontal specialization
C) horizontal diversification
D) unrelated diversification

Question 14

The main focus of Neptune Corp.is to sell apparel, which amounts to 70 percent of its revenue.It also runs warehouses, distribution centers, and logistics as additional businesses that generate the rest of the 30 percent of the earnings.Which level of diversification is followed by Neptune Corp.?

A) Single business
B) Dominant business
C) Related-linked business
D) Dominant vertical business

Question 15

The movement into an adjacent, or unrelated, market that is not along a firm's own value chain defines the term _____.

A) horizontal diversification
B) vertical specialization
C) forward integration
D) backward integration

Question 16

Marble Cakes Inc., after serving a good number of customers in its home state, has set up business in three other states with additional menu options of cupcakes, donuts, and coffees to generate new customers.This has enabled the company to successfully maintain its corporate strategy.Marble Cakes Inc.is engaging in _____.

A) vertical integration
B) horizontal specialization
C) vertical specialization
D) horizontal diversification

Question 17

Pluto Corp.has been manufacturing hardware materials for its existing customer base for several years.Recently, the company introduced a new line of electronic products to its customers.Pluto Corp.is engaging in _____.

A) vertical integration
B) market penetration
C) value based initiative
D) horizontal diversification

Question 18

Rest & Sleep Inc.is a mattress manufacturing firm.By manufacturing related products such as bed covers, comforters and quilts, and pillows, it has gained significant competitive advantage as it has managed to create profits in all these markets as well.Rest & Sleep creates a challenge for the other companies in the market by providing unique value through its customer services and warranties.Which of the following terms best describes what Rest & Sleep Inc.is practicing?

A) Market penetration
B) Business unit strategy
C) Corporate strategy
D) Unrelated diversification

Question 19

Which of the following statements is true of a corporate strategy?

A) It refers to a management strategy that focuses solely on the professional behavior and attitudes of a company's employees.
B) It entails competing in a core industry or business and also operating in adjacent businesses or markets.
C) It entails competing exclusively with large and well-established firms to increase competitive advantage.
D) It refers to the overall strategy that helps a company recruit the right type of employees for the right type of job.

Question 20

Movement by a firm along its own value chain in the direction of sales, service, or warranty operations is termed _____.

A) horizontal specialization
B) backward integration
C) forward integration
D) horizontal diversification

Question 21

Winter Sources Inc., an apparel manufacturer, recently opened a retail store in its unused office space to sell the excess material produced.In this way, the company generated extra profits.The unused space that was available to Winter Sources Inc.is an example of _____.

A) kanban
B) kaizen
C) hubris
D) slack

Question 22

BestBrew Corp.and True Coffee Inc.were two leading coffee manufacturing firms.They united and created a whole new firm called True Brew Inc.that used the best customer front-end and operational back-end processes of the two firms.This union is an example of a _____.

A) brownfield entry
B) greenfield entry
C) takeover
D) merger

Question 23

Summer Technologies Inc.is proud of its managerial personnel who have been able to create unique value for the company.These people have been engaged in coming up with strategic activities that enabled Summer Technologies to grow and establish itself as a reliable brand.This set of abilities of the Summer Technologies personnel can most accurately be termed _____.

A) management skill
B) employee expertise
C) collective wisdom
D) explicit knowledge

Question 24

Galaxy Corp.is a manufacturing company that aims to provide value to its customers by identifying sources of revenue, the intended customer base, products and processes, and details of financing.This method that Galaxy Corp.wants to adopt is termed _____.

A) a plan of action
B) a business model
C) dominant logic
D) prestige development

Question 25

Stacy works as a manager at Daffodils Corp., a manufacturing firm that has not been performing well.Despite the availability of research materials and databases, she uses her own experience to make acquisitions because she is usually very confident about the success of her plans.This attitude of Stacy can be termed _____.

A) hubris
B) selfishness
C) solipsism
D) megalomania

Question 26

Two firms recently had a bolt-on acquisition.Martha, the managing director of one of these firms, claims that an integration team is required to decide which tactical elements and operational functions of the two firms should be strategically integrated and implemented.She believes having this team will enable fair decisions to be made, thus inculcating a friendly atmosphere in the new firm.Which of the following statements strengthens Martha's claim?

A) Having the team may consume the company's time and effort, but in the long run, it may help the company grow.
B) The team members of the two firms may be biased toward their own firms, preventing fair implementation.
C) The team always makes sound decisions that are based on the integration templates that managers in the acquiring firm choose.
D) The team helps in deciding which culture will be incorporated in the new entity.

Question 27

Jupiter LLC is a manufacturer of leather items.The board of directors of Jupiter realized that it is better to produce handbags and shoes together rather than in two separate factories.This way, the company can reduce its production costs.This scenario best illustrates a(n) _____.

A) related-linked diversification
B) unrelated diversification
C) economy of scope
D) economy of scale

Question 28

Neon Colors Corp., a well-established apparel industry, increased its corporate value by purchasing a footwear company as part of its growth strategy.It purchased the footwear company because developing its own operations and processes would be expensive and time consuming.This is an example of a(n) _____.

A) merger
B) brownfield entry
C) acquisition
D) greenfield entry

Question 29

In order to successfully carry out an acquisition, the managers at Pink Inc.prepared a list of potential target companies that it could purchase.In the next step, the managers evaluated each prospective company in depth to understand their methods of operations, processes, procedures, strengths, and limitations in order to choose the best target company.This process of evaluating the companies is best known as _____.

A) due diligence
B) market intelligence
C) consultation
D) market evaluation

Question 30

Blue Work LLC, a software company, purchased an electronics and electrical company and implemented its resources and technologies in the target company.Blue Work changed the entire culture and brand of the target company and introduced its own culture such that the identity of the target company disappeared.Blue Work benefitted from this acquisition and witnessed a significant growth.This type of acquisition is known as a _____.

A) greenfield entry
B) takeover
C) union
D) merger

Question 31

Aquarius Corp., a consumer goods company, offers a chain of products that includes food and beverages, beauty care products, apparels, and home décor.By offering these goods, Aquarius creates more value for itself than it would have if it had sold these products individually.This practice by Aquarius Corp.can be referred to as _____.

A) imitation
B) synergy
C) a merger
D) an acquisition

Question 32

A company called Techno Plus LLC experienced a failed acquisition, but the managers of the company were hesitant to end the venture as they had already invested too much time, finances, and effort into it.They presumed that everything would work out with a little more money and time.This attitude of the managers of Techno Plus LLC can be termed _____.

A) hubris
B) arrogance
C) positive thinking
D) sunk cost fallacy

Question 33

Spring Resources LLC creates unique value by establishing a learning organization that coordinates various production tactics and assimilates different types of technologies.This knowledge is distributed to the entire organization so that its branches can adapt and perform according to their own markets.These tactics and technologies distributed throughout the organization that create value for Spring Resources LLC are termed _____.

A) inimitability practices
B) prestige development
C) core competencies
D) dominant logic

Question 34

Amber Corp., a jute manufacturing company, wants to diversify into the food industry.In order to do so, the board of directors decides to move some of its existing resources, expertise, and technology to set the base of the food unit.The market analysts at Amber predict that this unit has a high growth potential.Thus, rather than leaving the new food unit to grow on its own, the board decides to invest in it as it this will help increase the corporate value of the company.In this scenario, Amber Corp.is trying to create value by acting as a(n) _____.

A) adjacent market
B) internal capital market
C) external capital market
D) related-constrained market

Question 35

Lee, the CEO of Libra Inc., decided that the best way to diversify this food processing company would be to set up its own small-scale beverage producing unit in a new area where its new products would have high demands.This decision by Lee best reflects a(n)_____.

A) acquisition
B) greenfield entry
C) brownfield entry
D) merger

Question 36

Which of the following is an ancient Greek word for excessive pride, arrogance, or overconfidence that is used to refer to the actions of managers when they diversify or make acquisitions based on their own experience or gut feelings rather than on solid data and research?

A) Kanban
B) Hubris
C) Agora
D) Kaizen

Question 37

Azure LLC is a toy manufacturing company.The company has recently started manufacturing industrial wiring for construction companies.In this scenario, Azure LLC has chosen _____.

A) related diversification
B) unrelated diversification
C) related-linked diversification
D) related-constrained diversification

Question 38

Zia, the CEO of Indigo Corp., states that it is essential to diversify the company into new markets and to create new products.She believes that it is important and profitable to tap new customer bases and challenging markets as this experience will help the company grow financially as well as expand its knowledge base on strategic management.Which of the following statements strengthens Zia's belief?

A) Moderate diversification pays off but very high levels of diversification will lead to lower levels of performance.
B) The company will not be able to provide the same value and customer satisfaction when segmented.
C) Diversification will create a loss of revenue if the parent company decides to segment itself to different markets.
D) Diversification will reduce the company's overall cost of producing goods and services.

Question 39

Elegant Meals Inc., a company that owns a chain of restaurants, sells dinnerware to its customers who fancy them.Since their restaurants are known for their interior designs, they also sell home décor products.By selling these products, Elegant Meals Inc.caters to a(n) _____.

A) entertainment market
B) capital market
C) adjacent market
D) global market

Question 40

Even though companies offer varied products and provide unique value to their customers, they have similar barriers to face when entering into a host country due to policies set up by the country's government.The similarities shared by the companies in the way they set up business in the country are an example of a(n) _____.

A) plan of action
B) passive judgment
C) dominant logic
D) imitation

Question 41

What are the mechanisms that help companies in exploiting and/or expanding their resources and capabilities?

Question 42

How does diversification help exploit existing customer-facing resources?

Question 43

Mention the factors that lead to destroying value through diversification.Explain any three of them.

Question 44

In vertical integration, movement in the direction of raw materials is _____.

Question 45

How does a related-constrained diversification differ from a related-linked diversification?

Question 46

Explain the ways in which diversification adds value.

Question 47

What does the term adjacent market mean?

Question 48

What is a greenfield entry? When should a company use it?

Question 49

A firm earning more than 95 percent of the revenues from a single line of business is known as a _____.

Question 50

What are the two challenges related to acquisition premium that an acquiring firm faces when acquiring a target firm?