Question 1

Research shows that a key competence of high-performance diversified firms is the ability to

Accepted Answer

A) hide excess capital. 
B) efficiently dispose of excess capital. 
C) effectively allocate financial capital. 
D) invest internationally.

Question 2

In the BCG Growth Share Matrix,the suggested strategy for stars is to

Accepted Answer

A) milk them to finance other businesses. 
B) invest large sums to gain a good market share. 
C) maintain position and after the market growth slows use the business to provide cash flow. 
D) not invest in them and to shift cash flow to other businesses.

Question 3

Firms have several choices of diversification initiatives that can be used to create value.Which of the following is not one of them?

Accepted Answer

A) using related diversification to acquire economies of scope 
B) using related diversification to acquire market power 
C) using unrelated diversification to acquire financial synergies 
D) using related diversification to acquire parenting and restructuring synergies

Question 4

Firms that choose to diversify through internal development must develop ________ that allow them to move ________ from initial opportunity recognition to market introduction.

Accepted Answer

A) strategies;slowly 
B) capabilities;quickly 
C) capabilities;slowly 
D) strategies;quickly

Question 5

ConAgra,a diversified food producer,increases its power over suppliers by centrally purchasing huge quantities of packaging materials for all its food divisions.This is an example of using

Accepted Answer

A) related diversification to acquire economies of scope by leveraging pooled negotiating power. 
B) related diversification to acquire market power by leveraging pooled negotiating power. 
C) unrelated diversification to acquire financial synergies through portfolio management. 
D) unrelated diversification to acquire parenting,restructuring,and financial synergies through restructuring and parenting.

Question 6

In 2012,Microsoft admitted to a major ________ mistake when it wrote off essentially the entire 6.2 billion USD it paid for a digital advertising firm,aQuantive,that it purchased in 2007.

Accepted Answer

A) expansion 
B) divestiture 
C) acquisition 
D) cost savings

Question 7

In recent years,many high-tech firms such as Priceline.com have suffered from the negative impact of uncontrolled growth.

Accepted Answer

A) True 
 B)False

Question 8

Portfolio models such as the BCG Portfolio matrix are limited in value because they only compare the SBU on four dimensions.

Accepted Answer

A) True 
 B)False

Question 9

Portfolio models are used to assist a firm in

Accepted Answer

A) achieving a portfolio of businesses. 
B) unbalancing its portfolio of businesses. 
C) achieving a balanced portfolio of businesses. 
D) generating excess cash.

Question 10

The term "golden parachute" refers to

Accepted Answer

A) a clause requiring that huge dividend payments be made upon takeover. 
B) pay given to executives fired because of a takeover. 
C) financial inducements offered by a threatened firm to stop a hostile suitor from acquiring it. 
D) managers of a firm in a hostile takeover approaching a third party about making the acquisition.

Question 11

In 2014,Apple purchased Beats Electronics for billion USD.While Apple valued the product portfolio of Beats,its primary aim was to pull the founders of Beats,Jimmy Iovine and Dr.Dre (aka Andrew Young),into the Apple family.This is an example of acquiring firms using acquisitions to acquire

Accepted Answer

A) critical financial resources. 
B) critical human capital. 
C) critical reputation. 
D) critical land resources.

Question 12

When using a BCG matrix,a ________ is a business that currently holds a large market share in a rapidly growing market and has minimal or negative cash flow.

Accepted Answer

A) star 
B) dog 
C) cash cow 
D) question mark

Question 13

If a multinational firm is unable to understand how the assets of the acquired company would fit with their own lines of business,this can lead to

Accepted Answer

A) expansion. 
B) divestiture. 
C) cost savings. 
D) acquisition.

Question 14

Which of the following is not a reason for merger and acquisition failures?

Accepted Answer

A) The acquiring company pays a large premium for the common stock of the target company. 
B) Top executives act in their best interests rather than those of the shareholders. 
C) The acquisition leads to value creation. 
D) The acquired company assets are poorly integrated into the acquiring company business lines.

Question 15

Proctor and Gamble is a large multinational organization that has many business sharing distribution resources.Diversification strategies take advantage of the ________ that exist in their organization.

Accepted Answer

A) costs 
B) employees 
C) discontinuities 
D) synergies

Question 16

Asset restructuring involves the sale of ________ assets,or even whole lines of businesses that are peripheral.

Accepted Answer

A) productive 
B) efficient 
C) unproductive 
D) inefficient

Question 17

When Cabot Corporation used the BCG matrix to evaluate its carbon black manufacturing business,the model led them to move away from ________ and to diversify into unrelated businesses listed as stars by the model.This resulted in a decline on return on assets.They eventually returned to carbon black manufacturing and divested the unrelated businesses;their 2016 revenue was 2.4 billion USD.

Accepted Answer

A) the dog quadrant 
B) its core market 
C) the question mark quadrant 
D) semiconductor manufacturing

Question 18

Portfolio management matrices are applied to what level of strategy?

Accepted Answer

A) departmental level 
B) business level 
C) corporate level 
D) international level

Question 19

Transaction costs include all the following costs except

Accepted Answer

A) monitoring costs. 
B) negotiating costs. 
C) search costs. 
D) agency costs.

Question 20

________ is when the corporate office helps subsidiaries make wise choices in their own acquisitions,divestures,and new ventures,thereby creating value within business units.

Accepted Answer

A) Parenting 
B) Restructuring 
C) Leveraging core competencies 
D) Increasing market power

Exam 6: Corporate-Level Strategy: Creating Value Through Diversification