question

A. picking the new industries to enter and deciding on the means of entry. B. initiating actions to boost the combined performance of the businesses the firm has entered. C. pursuing opportunities to leverage cross-business value chain relationships and strategic fits into competitive advantage. D. establishing investment priorities and steering corporate resources into the most attractive business units. E. All of these.

answer

The task of crafting corporate strategy for a diversified company encompasses

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Choosing the appropriate value chain for each business the company has entered

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Which one of the following is not one of the elements of crafting corporate strategy for a diversified company?

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is faced with diminishing market opportunities and stagnating sales in its principal business

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Diversification merits strong consideration whenever a single-business company

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A. spots opportunities to expand into industries whose technologies and products complement its present business. B. can leverage existing competencies and capabilities by expanding into industries where these same resource strengths are key success factors and valuable competitive assets. C. has a powerful and well-known brand name that can be transferred to the products of other businesses and thereby used as a lever for driving up the sales and profits of such businesses. D. can open up new avenues for reducing costs by diversifying into closely related businesses. E. All of these.

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Diversification becomes a relevant strategic option when a company

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a company begins to encounter diminishing growth prospects in its mainstay business.

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Diversification ought to be considered when

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When a company is only earning a low profit margin in its principal business.

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Diversification becomes a relevant strategic option in all but which one of the following situations?

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builds shareholder value.

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Diversifying into new businesses is justifiable only if it

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diversify into businesses that can perform better under a single corporate umbrella than they could perform operating as independent, stand-alone businesses.

answer

To create value for shareholders via diversification, a company must

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the attractiveness test, the cost-of-entry test, and the better-off test.

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The three tests for judging whether a particular diversification move can create value for shareholders are

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the attractiveness test, the cost of entry test, and the better-off test.

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To test whether a particular diversification move has good prospects for creating added shareholder value, corporate strategists should use

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conditions in the target industry are sufficiently attractive to permit earning consistently good profits and returns on investment.

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The attractiveness test for evaluating whether diversification into a particular industry is likely to build shareholder value involves determining whether

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considering whether a company's costs to enter the target industry are low enough to allow for good profits or so high that potential profits would be eroded.

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The cost-of-entry test for evaluating whether diversification into a particular industry is likely to build shareholder value involves

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evaluating whether the diversification move will produce a 1 + 1 = 3 outcome such that the company's different businesses perform better together than apart and the whole ends up being greater than the sum of the parts.

answer

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves

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acquiring a company already operating in the target industry, creating a new business subsidiary internally to compete in the target industry, or forming a joint venture with another company to enter the target industry.

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A company can best accomplish diversification into new industries by

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acquisition of an existing business already in the chosen industry.

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The most popular strategy for entering new businesses and accomplishing diversification is

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is an effective way to hurdle entry barriers, is usually quicker than trying to launch a brand-new start-up operation, and allows the acquirer to move directly to the task of building a strong position in the target industry.

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Acquisition of an existing business is an attractive strategy option for entering a promising new industry because it

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the pre-acquisition market value of the target company.

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An acquisition premium is the amount by which the price offered for an existing business exceeds

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the company has ample time and adequate resources to launch the new internal start-up business from the ground up.

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Internal development of a new business subsidiary can be a more attractive means of entering a desirable new business than is acquiring an existing firm already in the targeted industry when

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When the industry is growing rapidly and the target industry is comprised of several relatively large and well-established firms.

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Which one of the following is not a factor that makes it appealing to diversify into a new industry by forming an internal start-up subsidiary to enter and compete in the target industry?

question

there is ample time to launch the new business from the ground up and entry barriers can be hurdled at acceptable cost.

answer

Diversifying into a new industry by forming a new internal subsidiary to enter and compete in the target industry is attractive when

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a firm is missing some essential skills or capabilities or resources and needs a partner to supply the missing expertise and competencies or fill the resource gaps.

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A joint venture is an attractive way for a company to enter a new industry when

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the opportunity is too risky or complex for a company to pursue alone, a company lacks some important resources or competencies and needs a partner to supply them, and/or a company needs a local partner in order to enter a desirable business in a foreign country.

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A joint venture is an attractive way for a company to enter a new industry when

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A. Does the company have all of the resources and capabilities it requires to enter the business through internal development or is it lacking some critical resources? B. Are there entry barriers to overcome? C. Is speed an important factor in the firm's chances for successful entry? D. Which is the least costly mode of entry, given the company's objectives? E. All of these.

answer

The answers to what questions relate to the choice on how best to enter a new business?

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A. the costs of searching for an attractive target. B. the costs of evaluating its worth. C. bargaining costs. D. the costs of completing the transaction. E. All of these.

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The transaction costs of completing a business agreement or deal of some sort, over and above the price of the deal can include

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their value chains possess competitively valuable cross-business relationships.

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The essential requirement for different businesses to be "related" is that

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Related diversification offers more competitive advantage potential than does unrelated diversification

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Which of the following is an important appeal of a related diversification strategy?

question

their value chains possess competitively valuable cross-business relationships that present opportunities to transfer resources from one business to another, combine similar activities and reduce costs, share use of a well-known brand name, and/or create mutually useful resource strengths and capabilities.

answer

Businesses are said to be "related" when

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Related diversification is particularly well-suited for the use of first-mover strategies and capturing valuable financial fits.

answer

Which of the following is not one of the appeals of related diversification?

question

A. to transfer expertise or technology or capabilities from one business to another. B. for cross-business use of a common brand name. C. to lower costs by combining the performance of the related value chain activities of different businesses. D. for cross-business collaboration to build valuable new resource strengths and competitive capabilities. E. All of these.

answer

Strategic fit between two or more businesses exists when one or more activities comprising their respective value chains present opportunities

question

diversify into new industries that present opportunities to transfer competitively valuable expertise, technological know-how, or other capabilities from one business to another.

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One strategic fit-based approach to related diversification would be to

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identifying an attractive industry whose value chain has good strategic fit with one or more of the firm's present businesses.

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A company pursuing a related diversification strategy would likely address the issue of what additional industries/businesses to diversify into by

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anywhere along the respective value chains of related businesses—no one place is best.

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The best place to look for cross-business strategic fit is

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anywhere along the respective value chains of related businesses.

answer

Cross-business strategic fits can be found

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Strategic fit is primarily a byproduct of unrelated diversification and exists when the value chain activities of unrelated businesses possess economies of scope and good financial fit.

answer

Which of the following statements about cross-business strategic fit in a diversified enterprise is not accurate?

question

the opportunity to convert cross-business strategic fits into competitive advantages over business rivals whose operations don't offer comparable strategic fit benefits.

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What makes related diversification an attractive strategy is

question

are cost reductions that flow from operating in multiple related businesses.

answer

Economies of scope

question

stem from cost-saving strategic fits along the value chains of related businesses.

answer

Economies of scope

question

Being able to eliminate or reduce costs by combining related value-chain activities of different businesses into a single operation

answer

Which of the following best illustrates an economy of scope?

question

it offers ways for a firm to realize 1 + 1 = 3 benefits because the value chains of the different businesses present competitively valuable cross-business relationships.

answer

A big advantage of related diversification is that

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has a clear path to achieving 1 + 1 = 3 gains in shareholder value.

answer

A diversified company that leverages the strategic fits of its related businesses into competitive advantage

question

discounts the importance of strategic fit benefits and instead focuses on building and managing a group of businesses capable of delivering good financial performance irrespective of the industries these businesses are in.

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A strategy of diversifying into unrelated businesses

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any company that can be acquired on good financial terms and that has satisfactory growth and earnings potential represents a good acquisition and a good business opportunity.

answer

The basic premise of unrelated diversification is that

question

screening acquisition candidates and evaluating the pros and cons of keeping or divesting existing businesses.

answer

In diversified companies with unrelated businesses, the strategic attention of top executives tends to be focused on

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Looking for new businesses that present good opportunities for achieving economies of scope

answer

Which of the following is not likely to command much strategic attention from the top executives of companies pursuing an unrelated diversification strategy?

question

how wide a net to cast in building a portfolio of unrelated businesses.

answer

A key issue in companies pursuing an unrelated diversification strategy is

question

struggling companies with good turnaround potential, undervalued companies that can be acquired at a bargain price, and companies that have bright growth prospects but are short on investment capital.

answer

With an unrelated diversification strategy, the types of companies that make particularly attractive acquisition targets are

question

spotting bargain-priced companies with big upside potential and then turning around their operations quickly with the aid of the parent company's financial resources and managerial know-how.

answer

The success of unrelated diversification is dependent upon management's ability to

question

spreads the business risk across a group of truly diverse industries.

answer

One appealing aspect of unrelated diversification is that it

question

Superior top management ability to cope with the wide variety of problems encountered in managing a broadly diversified group of businesses

answer

Which of the following is not one of the appeals of an unrelated diversification strategy?

question

it is more able than other companies to boost the combined performance of its individual businesses through high-level guidance, general oversight, and other corporate-level contributions.

answer

A diversified company has a parenting advantage when

question

demanding managerial requirements and limited competitive advantage potential that cross-business strategic fit provides.

answer

The two biggest drawbacks or disadvantages of unrelated diversification are

question

the difficulties of competently managing many different businesses and being without the added source of competitive advantage that cross-business strategic fit provides.

answer

The two biggest drawbacks or disadvantages of unrelated diversification are

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Ending up with too many cash hog businesses (as compared to related diversification strategies where cash hog businesses are rare)

answer

Which of the following is not among the disadvantages and managerial problems encountered by companies pursuing unrelated diversification strategies?

question

each business is on its own in trying to build a competitive edge and the consolidated performance of the businesses is likely to be no better than the sum of what the individual businesses could achieve if they were independent.

answer

In companies pursuing a strategy of unrelated diversification,

question

A. In order to reduce risk by spreading the company's investments over a set of truly diverse industries. B. To enable a company to achieve rapid or continuous growth. C. To chance that market downtrends in some of the company's businesses will be partially offset by cyclical upswings in its other businesses. D. To provide benefits to managers such as high compensation and reduction in employment risk. E. All of these.

answer

What rationales for unrelated diversification are not likely to increase shareholder value?

question

Dominant Business Enterprise.

answer

Which of the following is a diversified business with one major "core" business and a collection of small related or unrelated businesses?

question

the extent to which the firm is broadly or narrowly diversified, whether it is pursuing related or unrelated diversification (or a mixture of both), and the recent moves it has made to divest businesses, acquire new businesses, and strengthen the positions of existing businesses.

answer

To identify a diversified company's strategy, one should consider such factors as

question

Actions over the past few years to substitute global strategies for multi-country strategies in one or more business units

answer

When identifying a diversified company's present corporate strategy, which of the following would not be something to look for?

question

A. assessing the attractiveness of the industries the company has diversified into. B. assessing the competitive strength of each business the company has diversified into to see which ones are the strongest/weakest contenders in their respective industries. C. ranking the performance prospects of the various businesses from best to worst and determining the priorities for resource allocation. D. checking the competitive advantage potential of cross-business strategic fits and also checking whether the firm's resources fit the needs of its present business lineup. E. All of these.

answer

The procedure for evaluating the pluses and minuses of a diversified company's strategy includes

question

Scrutinizing each industry/business to determine where driving forces are strongest/weakest and how many profitable strategic groups the company has diversified into

answer

Which of the following is not a major consideration in evaluating the pluses and minuses of a diversified company's strategy?

question

A. evaluating the attractiveness of industries the company has diversified into and the competitive strength of each of its business units. B. evaluating the strategic fits and resource fits among the various sister businesses. C. ranking the performance prospects of the businesses from best to worst and determining what the corporate parent's priorities should be in allocating resources to its various businesses. D. using the results of the prior analytical steps as a basis for crafting new strategic moves to improve the company's overall performance. E. All of these.

answer

A comprehensive evaluation of the group of businesses a company has diversified into involves

question

evaluating the strategic fits and resource fits among the various sister businesses and deciding what priority to give each of the company's business units in allocating resources.

answer

Evaluating a diversified company's corporate strategy and critiquing the pluses and minuses of its business lineup involves

question

Determining which business units are cash cows and which ones are cash hogs and then evaluating how soon the company's cash hogs can be transformed into cash cows

answer

Which one of the following is not an important aspect of evaluating the merits of a diversified company's strategy?

question

A. consider whether each industry the company has diversified into represents a good business for the company to be in. B. calculate industry attractiveness scores for each industry into which the company has diversified. C. consider the appeal of the whole group of industries in which the company has invested. D. consider to what extent the industries a company has invested in holds promise for attractive growth and profitability. E. All of these.

answer

In judging the attractiveness of the businesses a multi-business company has diversified into, it is important to

question

A. market size and projected growth rate. B. emerging opportunities and threats, the intensity of competition, and the degree of industry uncertainty and business risk. C. resource requirements and the presence of cross-industry strategic fits. D. seasonal and cyclical factors, industry profitability, and whether an industry has significant social, political, regulatory, and environmental problems. E. All of these.

answer

As a rule, all the industries represented in a diversified company's business portfolio should be judged on such attractiveness factors as

question

The frequency with which strategic alliances and collaborative partnerships are used in each industry, the extent to which firms in the industry utilize outsourcing, and whether the industries a company has diversified into have common key success factors

answer

Which of the following is not generally something that ought to be considered in evaluating the attractiveness of a diversified company's business makeup?

question

quantitative industry attractiveness scores derived from rating each industry on several relevant attractiveness measures (weighted according to their relative importance in determining overall attractiveness).

answer

Assessments of the long-term attractiveness of each industry represented in a diversified company's lineup of businesses should be based on

question

selecting a set of industry attractiveness measures, weighting the importance of each measure, rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to evaluate the attractiveness of all the industries, both individually and as a group.

answer

Calculating quantitative attractiveness ratings for the industries a company has diversified into involves

question

provide a basis for drawing analysis-based conclusions about the attractiveness of the industries a company has diversified into, both individually and as a group, and further to provide an indication of which industries offer the best and worst long-term prospects.

answer

The chief purpose of calculating quantitative industry attractiveness scores for each industry a company has diversified into is to

question

the various measures of attractiveness are not likely to be equally important in determining overall attractiveness.

answer

A weighted industry attractiveness assessment is generally analytically superior to an unweighted assessment because

question

which industries appear to be the best and worst ones to be in and the attractiveness of all the industries as a group from the standpoint of the company's long-term performance.

answer

When industry attractiveness ratings are calculated for each of the industries a multi-business company has diversified into, the results help indicate

question

provides a basis for deciding whether a diversified company has good prospects for growth and profitability, given the attractiveness ratings of the industries in which it has business interests.

answer

Calculating quantitative attractiveness ratings for the industries a diversified company has invested in

question

A. Deciding on the appropriate weights for the attractiveness measures. B. Different analysts use different weights for the different attractiveness measures. C. Gaining sufficient command of the industry to assign more accurate and objective ratings. D. None of these. E. All of these.

answer

What hurdles are present to calculating industry attractiveness scores?

question

determine how strongly positioned each business unit is in its industry.

answer

The basic purpose of calculating competitive strength scores for each of a diversified company's business units is to

question

relative market share, ability to match or beat rivals on key product attributes, brand image and reputation, costs relative to competitors, and ability to benefit from strategic fits with sister businesses.

answer

Assessments of how a diversified company's subsidiaries compare in competitive strength should be based on such factors as

question

calculated by dividing a business's percentage share of total industry sales volume by the percentage share held by its largest rival—it is a better indicator of a business's competitive strength than is a simple percentage measure of market share.

answer

Relative market share is

question

selecting a set of competitive strength measures, weighting the importance of each measure, rating each business on each strength measure, multiplying the strength ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each business unit to obtain an overall competitive strength score, and using the overall competitive strength scores to evaluate the competitive strength of all the businesses, both individually and as a group.

answer

Calculating quantitative competitive strength ratings for each of a diversified company's business units involves

question

to have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries.

answer

The value of determining the relative competitive strength of each business a company has diversified into is

question

is useful for helping decide which businesses should have high, average, and low priorities in allocating corporate resources.

answer

The nine-cell industry attractiveness-competitive strength matrix

question

that corporate resources should be concentrated on those businesses enjoying both a higher degree of industry attractiveness and competitive strength and that businesses having low competitive strength in relatively unattractive industries should be looked at for possible divestiture.

answer

The most important strategy-making guidance that comes from drawing a 9-cell industry attractiveness-competitive strength matrix is

question

that businesses having the greatest competitive strength and positioned in the most attractive industries should have the highest priority for corporate resource allocation and that competitively weak businesses in relatively unattractive industries should have the lowest priority and perhaps even be considered for divestiture.

answer

One of the most significant contributions to strategy-making in diversified companies that the 9-cell industry attractiveness/competitive strength matrix provides is

question

it has value chain relationships with other business subsidiaries that present competitively valuable opportunities to transfer skills or technology or intellectual capital from one business to another, combine the performance of related activities and reduce costs, share use of a well-respected brand name, or collaborate to create new competitive capabilities.

answer

n a diversified company, a business subsidiary has more competitive advantage potential when

question

A. opportunities to combine the performance of certain cross-business activities and thereby reduce costs. B. opportunities to transfer skills, technology, or intellectual capital from one business to another. C. opportunities for the company's different businesses to share use of a well-respected brand name. D. opportunities for sister businesses to collaborate in creating valuable new competitive capabilities. E. All of these.

answer

Checking the competitive advantage potential of cross-business strategic fits in a diversified company involves evaluating the extent to which sister businesses present

question

which business units are cash cows and which ones are cash hogs.

answer

Checking a diversified company's business portfolio for the competitive advantage potential of cross-business strategic fits does not involve ascertaining

question

the extent to which there are competitively valuable relationships between the value chains of sister business units and what opportunities they present to reduce costs, share use of a potent brand name, create competitively valuable new capabilities via cross-business collaboration, or transfer skills or technology or intellectual capital from one business to another.

answer

Checking a diversified firm's business portfolio for the competitive advantage potential of cross-business strategic fits entails consideration of

question

Ascertaining the extent to which sister business units are making maximum use of the parent company's competitive advantages

answer

Which of the following is not a part of checking a diversified company's business units for cross-business competitive advantage potential?

question

a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin and when individual businesses add to a company's overall strengths.

answer

A diversified company's business units exhibit good resource fit when

question

individual businesses add to a company's resource strengths and when a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin

answer

The businesses in a diversified company's lineup exhibit good resource fit when

question

generates positive cash flows over and above its internal requirements, thus providing a corporate parent with cash flows that can be used for financing new acquisitions, investing in cash hog businesses, and/or paying dividends.

answer

A "cash cow" type of business

question

whether the corporate parent has sufficient cash to fund the needs of its individual businesses and pay dividends to shareholders without having to borrow money.

answer

The tests of whether a diversified company's businesses exhibit resource fit do not include

question

Determining whether some business units have value chain match-ups that offer opportunities to transfer skills or technology or intellectual capital from one business to another

answer

Which one of the following is not part of the task of checking a diversified company's business line-up for adequate resource fit?

question

Business subsidiaries with the brightest profit and growth prospects and solid strategic and resource fits generally should head the list for corporate resource support.

answer

Which one of the following is the best guideline for deciding what the priorities should be for allocating resources to the various businesses of a diversified company?

question

A. making acquisitions to establish positions in new businesses or to complement existing businesses. B. investing in ways to strengthen or grow existing businesses. C. funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses. D. paying off existing debt, increasing dividends, building cash reserves, or repurchasing shares of the company's stock. E. All of these.

answer

The options for allocating a diversified company's financial resources include

question

Concentrating most of a company's financial resources in cash cow businesses and allocating little or no additional resources to cash hog businesses until they show enough strength to generate positive cash flows

answer

Which one of the following is not a reasonable option for deploying a diversified company's financial resources?

question

A. broadening the company's business scope by making new acquisitions in new industries. B. divesting weak-performing businesses and retrenching to a narrower base of business operations. C. restructuring the company's business lineup with a combination of divestitures and new acquisitions to put a whole new face on the company's business makeup. D. pursuing growth opportunities within the existing business lineup. E. All of these.

answer

Corporate strategy options for diversified companies include

question

Increasing dividend payments to shareholders and/or repurchasing shares of the company's stock

answer

The strategic options to improve a diversified company's overall performance do not include which of the following categories of actions?

question

Craft new initiatives to build/enhance the reputation of the company's brand name

answer

Once a company has diversified into a collection of related or unrelated businesses and concludes that some strategy adjustments are needed, which one of the following is not one of the main strategy options that a company can pursue?

question

the company's present businesses offer attractive growth opportunities and can be counted on to create economic value for shareholders.

answer

The option of sticking with the current business lineup makes sense when

question

A. it has resources or capabilities that are eminently transferable to other related or complementary businesses. B. the company's growth is sluggish and it needs the sales and profit boost that a new business can provide. C. management wants to lessen the company's vulnerability to seasonal or recessionary influences or to threats from emerging new technologies. D. it wants to make new acquisitions to strengthen or complement some of its present businesses. E. All of these.

answer

A company that is already diversified may choose to broaden its business base by building positions in new related or unrelated businesses because

question

has the advantage of focusing a diversified firm's energies on building strong positions in a few core businesses rather the stretching its resources and managerial attention too thinly across many businesses.

answer

Retrenching to a narrower diversification base

question

A. certain businesses have questionable long-term potential. B. a diversified company has businesses that have little or no strategic or resource fits with the "core" businesses that management wishes to concentrate on. C. certain business units are weakly positioned and show poor prospects for providing a good return on investment. D. market conditions in a once-attractive business have badly deteriorated. E. All of these.

answer

Retrenching to a narrower diversification base can be attractive or advisable when

question

When a diversified company has too many cash cows

answer

In which of the following instances is retrenching to a narrower diversification base not likely to be an attractive or advisable strategy for a diversified company?

question

A. selling a business outright. B. spinning the unwanted business off as a managerially and financially independent company by selling shares to the investing public via an initial public offering of stock. C. spinning the unwanted business off as a managerially and financially independent company by distributing shares in the new company to existing shareholders of the parent company. D. All of these.

answer

Divestiture can be accomplished by

question

divesting some businesses and acquiring new ones so as to put a new face on a diversified company's business makeup.

answer

Strategies to restructure a diversified company's business lineup involves

question

involve making radical changes in a diversified company's business lineup, divesting some businesses and acquiring new ones so as to put a new face on the company's business lineup.

answer

Corporate restructuring strategies

question

A. ongoing declines in the market shares of one or more major business units that are falling prey to more market-savvy competitors. B. a business lineup that consists of too many slow-growth, declining, low-margin, or competitively weak businesses. C. an excessive debt burden with interest costs that eat deeply into profitability. D. ill-chosen acquisitions that haven't lived up to expectations. E. All of these.

answer

Conditions that may make corporate restructuring strategies appealing include

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