Deck 6: Corporate Strategies

Question 1

Most acquisitions are financially beneficial to the shareholders of the acquiring firm.

Answer 1

False

Question 2

Acquisitions are a common type of merger.

Answer 2

True

Question 3

Which of the following is a strength of a concentration strategy?

A)Product obsolescence will rarely affect a firm pursuing this strategy
B)Executives can develop in-depth knowledge of the business
C)Risk of bankruptcy is minimal
D)Firms pursuing this strategy are rarely acquired by another firm
E)Changes in the environment can dramatically alter profitability

Answer 3

B

Question 4

Concentration is the most complex corporate-level strategy.

Question 5

A common criticism that applies to many portfolio models is that they are based on the past instead of the future.

Question 6

What has been observed as the relationship between diversification and firm performance?

A)Moderate levels of diversification provide the highest performance
B)Low levels of diversification provide the highest performance
C)High levels of diversification provide the highest performance
D)Moderate levels of diversification provide the lowest performance
E)None of these

Question 7

Management of resources is a major corporate-level strategic management responsibility.

Question 8

Direction setting is a major corporate-level strategic management responsibility.

Question 9

Which of the following is a weakness of a concentration strategy?

A)The organization cannot develop a distinctive competence
B)Organizational resources are severely strained
C)External stakeholders are easily confused by the firm's strategic agenda
D)There is high ambiguity regarding strategic direction
E)Uneven cash flow

Question 10

Which of the following is not considered a corporate-level strategy?

A)Differentiation
B)Concentration
C)Related diversification
D)Unrelated diversification
E)None of the above.These are all corporate-level strategies

Question 11

Synergy among businesses is created instantly if they are related to each other.

Question 12

According to the theory of transaction cost economics,a market is likely to fail if:

A)There are a large number of suppliers
B)All parties to the transaction have the same level of knowledge
C)The future is highly uncertain
D)The future is highly certain
E)Assets may be used to produce a variety of products or services

Question 13

Related diversification differs from unrelated diversification in which of the following ways?

A)Related diversification is connected to the organization's dominant business; unrelated diversification is not
B)Unrelated diversification is connected to the organization's dominant business; related diversification is not
C)Single business firms use related diversification and never use unrelated diversification
D)Single business firms use unrelated diversification and never use related diversification
E)A firm that uses related diversification always uses vertical integration; a firm that uses unrelated diversification never uses vertical integration

Question 14

As corporate-level strategies develop,any of the following strategies might be expected to directly follow a concentration strategy except:

A)Vertical integration
B)Diversification of markets
C)Diversification of products/services
D)Diversification of resource conversion processes (technologies)
E)Restructuring

Question 15

Transaction cost economics is used primarily to determine when unrelated diversification is appropriate.

Question 16

In a typical vertical supply chain,the major stage of the industry that immediately follows raw materials extraction is:

A)Wholesaling
B)Retailing
C)Final product manufacturing
D)Primary manufacturing
E)None of these

Question 17

Market saturation is one possible reason for firms to abandon their concentration strategies.

Question 18

Managers sometimes choose to diversify because they are motivated by power,income,and status.

Question 19

Which of the following is typically a corporate-level strategy formulation responsibility?

A)Establishment of short-term operating goals
B)Choice of generic strategy for each business unit
C)Selection of businesses in which to compete
D)Direct supervision of research and development programs
E)None of the above

Question 20

All of the following are reasons that firms pursue vertical integration strategies except:

A)To obtain better or more complete information about supplies or markets
B)Less dependence on one industry
C)Increased control over the quality of supplies
D)Greater opportunities to differentiate a product
E)Reduction of transaction costs

Question 21

Discuss the major corporate-level strategy formulation responsibilities.How are they different from business-level strategy formulation responsibilities?

Question 22

When an organization can use the same physical resources for multiple purposes,it is taking advantage of:

A)Intangible relatedness
B)Tangible relatedness
C)Limited scope
D)Dominant industry relationships
E)Goodwill

Question 23

Successful strategic alliances are characterized by all of the following except:

A)Careful planning and execution
B)Selection of partners with complementary resources
C)Effective use of coordinating mechanisms
D)Potential for financial economies
E)Selection of an appropriate governance method

Question 24

If all of the businesses of an organization are related to a common "core" business,the organization is probably pursuing which corporate strategy?

A)Prospector
B)Cost focus
C)Vertical integration
D)Defender
E)Related diversification

Question 25

Which factors have been found to lead to unsuccessful mergers and acquisitions? Which factors are related to success?

Question 26

Strategic alliances:

A)Slow the speed of entry into a new field or market
B)Are considered a more risky diversification option than mergers
C)Encourage the entry of new competitors
D)Are often motivated by the desire to share resources across companies
E)Are associated with low levels of administrative costs

Question 27

One of the advantages of internal venturing is that:

A)It is a fast way to enter new markets
B)It is much less risky than other strategies
C)Proprietary information need not be shared with other companies
D)Profits are shared with other companies
E)None of the above

Question 28

Which of the following is most likely to occur as a result of an acquisition?

A)Increase in financial leverage
B)Increase in profitability
C)Increase in R&D
D)Increase in patents
E)Both C and D are correct

Question 29

In the Boston Consulting Group Matrix,cash cows:

A)Have high growth rates and low relative market share
B)Have low growth rates and high relative market share
C)Have low growth rates and low relative market share
D)Have high growth rates and high relative market share
E)Have low growth rates and low profitability

Question 30

When skills developed in one area can be applied to another area,which of the following results?

A)Intangible relatedness
B)Tangible relatedness
C)Specialized scope
D)Focus
E)Goodwill

Question 31

Why might an organization choose to diversify?

Question 32

Mergers are more likely to be successful if:

A)They are expensive
B)They are friendly
C)They involve high premiums
D)The managers of the acquired firm leave to make way for new managers
E)There is less money spent on R&D during the first year after acquisition

Question 33

Two organizations or business units have similar management processes,cultures,systems,and structures.These similarities are best described as:

A)Synergy
B)Managerial hubris
C)Business intelligence
D)Tangible relatedness
E)Organizational fit

Question 34

What are the requirements for achieving synergy through the combination of businesses?

Question 35

In the Boston Consulting Group Matrix,stars:

A)Have high growth rates and low relative market share
B)Have low growth rates and high relative market share
C)Have low growth rates and low relative market share
D)Have high growth rates and high relative market share
E)Have low growth rates and low profitability

Question 36

What is on the two axes of the Boston Consulting Group Matrix?

A)Stars and cash cows
B)Business growth rate and relative competitive position
C)Market share and relative competitive position
D)Profitability and business growth rate
E)Business growth rate and cash flow

Question 37

Strategic alliances:

A)Result in complete control by one firm
B)Incur low administrative costs
C)Entail a risk of opportunism by partners to the venture
D)Are desirable in all environments
E)Typically result in unfavorable stock market reactions