Question 1

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 _____.

Accepted Answer

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

Question 2

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?

Accepted Answer

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. D

Question 3

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 _____.

Accepted Answer

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

Question 4

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) _____.

Accepted Answer

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

Question 5

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)_____.

Accepted Answer

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

Question 6

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

Accepted Answer

The answer of What are the mechanisms that help companies...

Question 7

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 _____.

Accepted Answer

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

Question 8

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

Accepted Answer

The answer of In vertical integration, movement in the direction...

Question 9

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) _____.

Accepted Answer

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

Question 10

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 _____.

Accepted Answer

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

Question 11

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 _____.

Accepted Answer

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

Question 12

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

Accepted Answer

The answer of A firm earning more than 95 percent...

Question 13

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

Accepted Answer

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

Question 14

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) _____.

Accepted Answer

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

Question 15

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

Accepted Answer

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 16

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

Accepted Answer

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.

Question 17

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

Accepted Answer

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

Question 18

Explain the ways in which diversification adds value.

Accepted Answer

The answer of Explain the ways in which diversification adds...

Question 19

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 _____.

Accepted Answer

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

Question 20

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 _____.

Accepted Answer

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

Exam 6: Corporate Strategy

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) _____.