GBA 490 Exam 2 – Flashcards
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A company's competitive strategy deals with: A. Management's game plan for competing successfully—the specific efforts to please customers, offensive and defensive moves to counter the maneuvers of rivals, the reactions and responses to whatever market conditions prevail at the moment and the initiatives undertaken to improve the company's market position B. What its strategy will be in such functional areas as R, production, sales and marketing, distribution, finance and accounting and so on C. Its efforts to change its position on the industry's strategic group map D. Its plans for entering into strategic alliances, utilizing mergers or acquisitions to strengthen its market position, outsourcing some in-house activities to outside specialists and integrating forward or backward E. Its plans for overcoming the five competitive forces
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A
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While there are many routes to competitive advantage, they all involve A. Building a brand name image that buyers trust B. Delivering superior value to buyers and building competencies and resource strengths in performing value chain activities that rivals cannot readily match C. Achieving lower costs than rivals and becoming the industry's sales and market share leader D. Finding effective and efficient ways to strengthen the company's competitive assets and to reduce its competitive liabilities E. Getting in the best strategic group and dominating it
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B
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The biggest and most important differences among the competitive strategies of different companies boil down to A. How they go about building a brand name image that buyers trust and whether they are a risk-taker or risk-avoider B. The different ways that companies try to cope with the five competitive forces C. Whether a company's market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation D. The kinds of actions companies take to improve their competitive assets and reduce their competitive liabilities E. The relative emphasis they place on offensive versus defensive strategies
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C
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Which one of the following generic types of competitive strategy is typically the best strategy for a company to employ? A. A low-cost leadership strategy B. A broad differentiation strategy C. A best-cost provider strategy D. A focused low-cost provider strategy E. There is no such thing as a "best" competitive strategy; a company's "best" strategy is always one that is customized to fit both industry and competitive conditions and the company's own resources and competitive capabilities
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E
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A low-cost leader's basis for competitive advantage is A. Lower prices than rival firms B. Using a low cost/low price approach to gain the biggest market share C. High buyer switching costs D. Meaningfully lower overall costs than competitors E. Higher unit sales than rivals
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D
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Which of the following is not an action that a company can take to do a better job than rivals of performing value chain activities more cost-effectively? A. Striving to capture all available economies of scale and learning/experience curve effects B. Trying to operate facilities at full capacity C. Adopting labor-saving operating methods D. Improving supply chain efficiency E. Outsourcing all production-related activities
answer
E
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A company pursuing a low-cost leadership strategy must generally A. Have products with good-to-excellent attributes so that its low prices will provide customers with more value for the money B. Have acceptable quality products that incorporate a good basic design with few frills and offer a limited number of models/styles to select from C. Have a wide selection of products that are of average or better quality D. Design its product to emphasize a few chosen differentiating features and present a distinctive image to buyers E. Offer customized products that fit the specialized needs of the company's target group of customers
answer
B
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A strategy to be the industry's overall low-cost provider tends to be more appealing than a differentiation or best-cost or focus/market niche strategy when A. There are many ways to achieve product differentiation that buyers find appealing B. Buyers use the product in a variety of different ways and have high switching costs in changing from one seller's product to another C. The offerings of rival firms are essentially identical, standardized, commodity-like products D. Entry barriers are high and competition from substitutes is relatively weak E. The market is composed of many distinct segments with varying buyer needs and expectations
answer
C
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Successful differentiation allows a firm to A. Be the industry's best-cost provider B. Set the industry ceiling on price C. Avoid being dragged into a price war with industry rivals and not be overly concerned about whether entry barriers into the industry are high or low D. Command a premium price for its product and/or increase unit sales (because additional buyers are won over by the differentiating features), and/or gain buyer loyalty to its brand (because some buyers prefer the differentiating features and are thus brand loyal) E. Take sales and market share away from rivals by undercutting them on price
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D
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Opportunities to differentiate a company's product offering A. Are most reliably found in the R portion of the value chain B. Are typically located in the sales and marketing portion of the value chain C. Can exist in activities all along an industry's value chain D. Usually are tied to product quality and customer service E. Are most frequently attached to a company's manufacturing expertise and to its ability to achieve scale economies in production
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C
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Which of the following is not one of the four basic routes to achieving a differentiation-based competitive advantage? A. Delivering value to customers via competencies and competitive capabilities that rivals don't have or can't afford to match B. Incorporating features that raise product performance C. Incorporating product attributes and user features that lower the buyer's overall costs of using the company's product D. Appealing to buyers who are sophisticated and shop hard for the best, stand-out differentiating attributes E. Incorporating features that enhance buyer satisfaction in intangible or non-economic ways
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D
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A broad differentiation strategy generally produces the best results in situations where A. Buyer brand loyalty is low B. Buyer needs and uses of the product are diverse C. New and improved products are introduced only infrequently D. Most rivals are pursuing a differentiation strategy and are seeking to differentiate their products on most of the same features and attributes E. Price competition is vigorous
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B
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Which one of the following statements about pursuing a broad differentiation strategy is false? A. Any differentiating feature that works well is a magnet for imitators B. The best opportunities for achieving strong product differentiation are in the production technology and marketing portions of the value chain C. A low-cost provider strategy can defeat a broad differentiation strategy when buyers are satisfied with a basic product and don't think "extra" attributes are worth paying a higher price D. A differentiator's basis for competitive advantage is either a product/service offering whose attributes differ significantly from the offerings of rivals or else a set of capabilities for delivering customer value that rivals don't have E. Differentiation based on competencies and competitive capabilities tends to be more sustainable than differentiation based on product features
answer
B
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A company achieves best-cost provider status by A. Selling a product with the best cost at the best price B. Having the best cost (as compared to rivals) for each activity in the industry's value chain C. Providing buyers with the best attributes at the best cost D. Incorporating attractive or upscale attributes into its product offering at a lower cost than rivals E. Doing a better job than rivals of adopting the best operating practices
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D
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For a best-cost provider strategy to be successful, a company must have A. Excellent marketing and sales skills in convincing buyers to pay a premium price for the attributes/features incorporated in its product B. Resource strengths and competitive capabilities that allow it to incorporate upscale attributes at lower costs than rivals whose products have similar upscale attributes C. Access to greater learning/experience curve effects and scale economies than rivals D. One of the best-known and most respected brand names in the industry E. A short, low-cost value chain
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B
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A company's biggest vulnerability in employing a best-cost provider strategy is A. Relying too heavily on outsourcing B. Getting squeezed between the strategies of firms employing low-cost provider strategies and high-end differentiation strategies C. Getting trapped in a price war with low-cost leaders D. Being timid in cutting its prices far enough below high-end differentiators to win away many of their customers E. Not having a sustainable distinctive competence in cost reduction
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B
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Focused strategies keyed either to low-cost or differentiation are especially appropriate for situations where A. The market is composed of distinctly different buyer groups who have different needs or use the product in different ways B. Most other rival firms are using a best-cost producer strategy C. Buyers have strong bargaining power and entry barriers are low D. Most industry rivals have weakly differentiated products E. Most industry participants are also using focused low-cost or focused differentiation strategies
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A
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The chief difference between a low-cost leader strategy and a focused low-cost strategy is A. Whether the product is strongly differentiated or weakly differentiated from rivals B. The degree of bargaining power that buyers have C. The size of the buyer group that a company is trying to appeal to D. The type of value chain being used to achieve a low-cost competitive advantage E. The number of upscale attributes incorporated into the product offering
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C
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The risks of a focused strategy based on either low-cost or differentiation include A. The chance that competitors outside the niche will find effective ways to match the focuser's capabilities in serving the target niche B. The potential for the preferences and needs of niche members to shift over time towards many of the same product attributes and capabilities desired by buyers in the mainstream portion of the market C. The potential for the segment to become so attractive that it is soon inundated with competitors, intensifying rivalry and splintering sales, profits and growth prospects D. The potential for segment growth to slow to such a small rate that a focuser's prospects for future sales and profit gains become unacceptably dim E. All of these
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E
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The production emphasis of a company pursuing a broad differentiation strategy usually involves A. A search for continuous cost reduction without sacrificing acceptable quality and essential features B. Strong efforts to be a leader in manufacturing process innovation C. Efforts to build-in whatever differentiating features that buyers are willing to pay for and striving for product superiority D. Aggressive pursuit of economies of scale and experience curve effects E. Developing a distinctive competence in zero-defect manufacturing techniques
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C
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One of the big dangers in crafting a competitive strategy is that managers, torn between the pros and cons of the various generic strategies, will opt for A. A low-cost provider strategy because it is usually the safest, least risky competitive strategy B. A "stuck-in-the-middle" strategy C. A broad differentiation strategy because it is frequently the most profitable competitive strategy D. A best-cost provider because it has the biggest potential for generating the largest market share E. A focused low-cost or focused differentiation strategy because they are more insulated from competitive pressures
answer
B
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Once a company has decided to employ a particular generic competitive strategy, then it must make such additional strategic choices as A. Whether to enter into strategic alliances or collaborative partnerships B. Whether and when to employ offensive and defensive moves C. What type of Web site strategy to employ D. Whether to integrate forward or backward into more stages of the industry value chain E. All of the above
answer
A
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Which one of the following is not a strategic choice that a company must make to complement and supplement its choice of one of the five generic competitive strategies? A. Whether to enter into strategic alliances or collaborative partnerships B. Whether and when to employ offensive and defensive moves C. Whether to employ a market share leadership strategy D. Whether to integrate forward or backward into more stages of the industry value chain E. Whether to bolster the company's market position and competitiveness via acquisition or merger
answer
C
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Strategic alliances A. Are the cheapest means of developing new technologies and getting new products to market quickly B. Are collaborative arrangements where two or more companies join forces to achieve mutually beneficial strategic outcomes C. Are a proven means of reducing the costs of performing value chain activities D. Are best used to insulate a company from the impact of the five competitive forces E. Help insulate a firm from the adverse impacts of industry driving forces
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B
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Entering into strategic alliances and collaborative partnerships can be competitively valuable because A. Working closely with outsiders is essential in developing new technologies and new products in virtually every industry B. Cooperative arrangements with other companies are very helpful in racing against rivals to build a strong global presence and/or racing to seize opportunities on the frontiers of advancing technology C. They represent highly effective ways to achieve low-cost leadership and capture first-mover advantages D. They are a powerful way for companies to build loyalty and goodwill among customers with diverse needs and expectations E. They are quite effective in helping a company transfer the risks of threatening external developments to other companies
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B
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Experience indicates that strategic alliances A. Are generally successful B. Work well in cooperatively developing new technologies and new products but seldom work well in promoting greater supply chain efficiency C. Work best when they are aimed at achieving a mutually beneficial competitive advantage for the allies D. Have a high "divorce rate." E. Are rarely useful in helping a company win the race for global industry leadership than in establishing positions in industries of the future
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D
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The competitive attraction of entering into strategic alliances and collaborative partnerships is A. In allowing companies to bundle competencies and resources that are more valuable in a joint effort than when kept separate B. Speeding new products to market more quickly C. Enabling greater vertical integration D. In allowing the partners to build distinctive competencies E. In helping the partners to increase their respective market shares
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A
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The difference between a merger and an acquisition is that A. A merger involves one company purchasing the assets of another company with cash, whereas an acquisition involves a company acquiring another company by buying all of the shares of its common stock B. A merger is a pooling of equals whereas an acquisition involves one company, the acquirer, purchasing and absorbing the operations of another company, the acquired C. In a merger the companies retain their original names whereas in an acquisition the name of the company being acquired is changed to be the name of the acquiring company D. A merger is a combination of three or more companies whereas an acquisition is a pooling of interests of just two companies E. A merger involves two or more companies deciding to adopt the same strategy whereas an acquisition involves one company taking over the strategy-making function of another company
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B
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Mergers and acquisitions A. Are nearly always successful in achieving their desired purpose B. Frequently do not produce the hoped-for outcomes C. Are generally less effective than forming alliances or partnerships with these same companies D. Are highly risky because of the financial drain that comes from using the company's cash resources to pay for the costs of the merger or acquisition E. Are usually more successful in achieving cost reductions than in expanding a company's market opportunities
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B
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Vertical integration strategies A. Extend a company's competitive scope within the same industry by expanding its operations across more parts of the industry value chain B. Are one of the best strategic options for helping companies win the race for global market leadership C. Offer good potential to expand a company's lineup of products and services D. Are particularly effective in boosting a company's ability to expand into additional geographic markets, particularly the markets of foreign countries E. Are a good strategy option for helping a company to revamp its value chain and bypass low value-added activities
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A
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Which of the following is typically the strategic impetus for forward vertical integration? A. Being able to control the wholesale/retail portion of the industry value chain B. Fewer disruptions in the delivery of the company's products to end-users C. Gaining better access to end users and better market visibility D. Broadening the company's product line E. Allowing the firm access to greater economies of scale
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C
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Which of the following is not a strategic disadvantage of vertical integration? A. Vertical integration boosts a firm's capital investment in the industry, thus increasing business risk if the industry becomes unattractive later B. Vertical integration backward into parts and components manufacture can impair a company's operating flexibility when it comes to changing out the use of certain parts and components C. Vertical integration reduces the opportunity for achieving greater product differentiation D. Forward or backward integration often calls for radically different skills and business capabilities than the firm possesses E. Vertical integration poses all kinds of capacity-matching problems
answer
C
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Outsourcing strategies A. Are nearly always a more attractive strategic option than merger and acquisition strategies B. Carry the substantial risk of raising a company's costs C. Carry the substantial risk of making a company overly dependent on its suppliers D. Increase a company's risk exposure to changing technology and/or changing buyer preferences E. Involve farming out value chain activities presently performed in-house to outside specialists and strategic allies
answer
E
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Outsourcing the performance of value chain activities presently performed in-house to outside vendors and suppliers makes strategic sense when A. An activity can be performed better or more cheaply by outside specialists B. It allows a company to focus its entire energies on those activities that are at the center of its expertise (its core competencies) and that are most critical to its competitive and financial success C. Outsourcing won't adversely hollow out the company's technical know-how, competencies or capabilities D. It reduces the company's risk exposure to changing technology and/or changing buyer preferences E. All of these
answer
E
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The big risk of employing an outsourcing strategy is A. Causing the company to become partially integrated instead of being fully integrated B. Hollowing out a firm's own capabilities and losing touch with activities and expertise that contribute fundamentally to the firm's competitiveness and market success C. Hurting a company's R&D capability D. Putting the company in the position of being a late mover instead of an early mover E. Increasing the firm's risk exposure to both supply chain management failures and shifts in the composition of the industry value chain
answer
B
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Which of the following is not one of the principal offensive strategy options? A. Leapfrogging competitors by being the first adopter of next-generation technologies B. Offering an equally good or better product at a lower price C. Blocking the avenues open to challengers D. Attacking the competitive weakness of rivals E. A blue ocean strategy
answer
C
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Launching a preemptive strike type of offensive strategy entails A. Cutting prices below a weak rival's costs B. Moving first to secure an advantageous position that rivals are prevented or discouraged from duplicating C. Using hit-and-run tactics to grab sales and market share away from complacent or distracted rivals D. Attacking the competitive weaknesses of rivals E. Leapfrogging into next-generation products and technologies, thus forcing rivals to play catch-up
answer
B
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Which one of the following statements regarding the basis for offensive attack on rivals is false? A. It is generally wise to use a company's resource strengths to attack rivals in those competitive areas where they are strong B. Ignoring the need to tie a strategic offensive to a company's strengths is like going to war with a popgun C. Strategic offensives should, as a general rule, be predicated on leveraging a company's competitive assets—its core competencies, competitive capabilities and other resource strengths D. Offensive initiatives aimed at exploiting the competitive weaknesses of rivals stand a better chance of success than do those that challenge a competitor's strengths E. Attacking a market leader is always unwise
answer
E
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The purposes of defensive strategies are to A. Aggressively retaliate against rivals pursuing offensive strategies and prevent against price wars B. Lower the risk of being attacked by rivals, weaken the impact of any attack that occurs and influence challengers to aim their offensive efforts at other rivals C. Guard against adverse changes in the company's macro-environment and insulate the company from the impact of industry driving forces D. Strengthen a company's competitive advantage and reduce its exposure to business risk E. Eliminate a company's resource weaknesses and competitive deficiencies, thereby making it invulnerable to competitive attack from would-be challengers
answer
B
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Which of the following is a potential defensive move to ward off challenger firms? A. Granting volume discounts or better financing terms to dealers/distributors and providing discount coupons to buyers to help discourage them from experimenting with other suppliers/brands B. Signaling challengers that retaliation is likely in the event they launch an attack C. Lengthening warranties, offering free or low-cost training and support services and providing coupons and sample giveaways to buyers most prone to experiment with using rival brands D. Maintaining a war chest of cash and marketable securities E. All of these
answer
E
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One of the biggest Internet-related strategic issues facing many businesses is A. Whether to have a company Web site B. Whether and how to incorporate use of Internet technology applications in performing various internal value chain activities C. How best to try to offset the company's competitive disadvantage vis-à-vis rivals that already sell direct to buyers at their Web site D. Whether to form a strategic alliance with a pure dot-com enterprise E. What role the company's Web site should play in the company's competitive strategy
answer
E
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One very important advantage of a product-information-only Web site strategy is A. Lower advertising costs and lower customer service costs B. Avoiding the extra costs associated with operating Web site e-stores C. Added ability to interest potential buyers in purchasing the company's products D. Avoiding channel conflict E. Added ability to rely less heavily on strategic alliances with distributors/dealers
answer
D
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Assuming a company elects to use the Internet as its exclusive channel for accessing buyers, then which of the following is not one of the strategic issues that it will need to address? A. Whether to pursue a competitive advantage based on low-costs, differentiation or more value for the money B. How to deliver unique value to buyers C. How to draw traffic to its Web site and then convert page views into revenues D. Whether to employ a forward integration strategy E. Whether to perform order fulfillment activities internally or outsource them
answer
D
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Being first to initiate a particular move can have a high payoff when A. Pioneering helps build up a firm's image and reputation with buyers B. First-time buyers remain strongly loyal to pioneering firms in making repeat purchases C. Moving first can result in a cost advantage over rivals D. Moving first can constitute a preemptive strike, making imitation extra hard or unlikely E. All of these
answer
E
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In which of the following cases are first-mover disadvantages not likely to arise? A. When the costs of pioneering are much higher than being a follower and only negligible buyer loyalty or cost savings accrue to the pioneer B. When new infrastructure is needed before market demand can surge C. When the pioneer's skills, know-how and products are easily copied or even bested by late movers D. When customer loyalty to the pioneer is low E. When technological change is rapid and following rivals find it easy to leapfrog the pioneer with next-generation products of their own
answer
B
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The task of crafting corporate strategy for a diversified company encompasses 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
E
question
Which one of the following is not one of the elements of crafting corporate strategy for a diversified company? A. Picking new industries to enter and deciding on the means of entry B. Choosing the appropriate value chain for each business the company 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. Initiating actions to boost the combined performance of the businesses the firm has entered
answer
B
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Diversification merits strong consideration whenever a single-business company A. Has integrated backward and forward as far as it can B. Is faced with diminishing market opportunities and stagnating sales in its principal business C. Has achieved industry leadership in its main line of business D. Encounters declining profits in its mainstay business E. Faces strong competition and is struggling to earn a good profit
answer
B
question
Diversification ought to be considered when A. A company's profits are being squeezed and it needs to increase its net profit margins and return on investment B. A company lacks sustainable competitive advantage in its present business C. A company begins to encounter diminishing growth prospects in its mainstay business D. A company has run out of ways to achieve a distinctive competence in its present business E. A company is under the gun to create a more attractive and cost-efficient value chain
answer
C
question
Diversification becomes a relevant strategic option in all but which one of the following situations? A. When a company spots opportunities to expand into industries whose technologies and products complement its present business B. When a company is only earning a low profit margin in its principal business C. When a company 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. When a company can open up new avenues for reducing costs by diversifying into closely related businesses E. When a company can leverage existing competencies and capabilities by expanding into industries where these same resource strengths are key success factors and valuable competitive assets
answer
B
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Diversifying into new businesses is justifiable only if it A. Results in increased profit margins and bigger total profits B. Builds shareholder value C. Helps acompany escape the rigors of competition in its present business D. Leads to the development of a greater variety of distinctive competencies and competitive capabilities E. Helps the company overcome the barriers to entering additional foreign markets
answer
B
question
To test whether a particular diversification move has good prospects for creating added shareholder value, corporate strategists should use A. The profit test, the competitive strength test, the industry attractiveness test and the capital gains test B. The better-off test, the competitive advantage test, the profit expectations test and the shareholder value test C. The barrier to entry test, the competitive advantage test, the growth test and the stock price effect test D. The strategic fit test, the industry attractiveness test, the growth test, the dividend effect test and the capital gains test E. The attractiveness test, the cost of entry test and the better-off test
answer
E
question
The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves A. Assessing whether the diversification move will make the company better off because it will produce a greater number of core competencies B. Assessing whether the diversification move will make the company better off by improving its balance sheet strength and credit rating C. Assessing whether the diversification move will make the company better off by spreading shareholder risks across a greater number of businesses and industries D. 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 E. Assessing whether the diversification move will benefit shareholders due to gains in earnings per share and faster stock price appreciation
answer
D
question
Acquisition of an existing business is an attractive strategy option for entering a promising new industry because it A. 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 B. Is less expensive than launching a new start-up operation, thus passing the cost-of-entry test C. Is a less risky way of passing the attractiveness test D. Is more likely to result in passing the shareholder value test, the profitability test and the better-off test E. Offers the prospect of gaining an immediate competitive advantage in the new industry and thus helps ensure that the diversification move will pass the competitive advantage test for building shareholder value
answer
A
question
Internal start-up 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 A. The costs associated with internal startup are less than the costs of buying an existing company and the company has ample time and adequate resources to launch the new internal start-up business from the ground up B. There is a small pool of desirable acquisition candidates C. The target industry is growing rapidly and no good joint venture partners are available D. All of the potential acquisition candidates are losing money E. The target industry is comprised of several relatively large and well-established firms
answer
A
question
A joint venture is an attractive way for a company to enter a new industry when A. 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 B. It needs access to economies of scope and good financial fits in order to be cost-competitive C. It is uneconomical for the firm to achieve economies of scope on its own initiative D. The firm has no prior experience with diversification E. It has not built up a hoard of cash with which to finance a diversification effort
answer
A
question
A joint venture is an attractive way for a company to enter a new industry when A. The pool of attractive acquisition candidates in the target industry is relatively small B. It needs better access to economies of scope in order to be cost-competitive C. The industry is growing slowly and adding too much capacity too soon could create oversupply conditions D. The firm has no prior experience with diversification and the industry is on the verge of explosive growth E. 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
answer
E
question
The essential requirement for different businesses to be "related" is that A. Their value chains possess competitively valuable cross-business relationships B. The products of the different businesses are bought by much the same types of buyers C. The products of the different businesses are sold in the same types of retail stores D. The businesses have several key suppliers in common E. The productions methods that they employ both entail economies of scale
answer
A
question
Which of the following is the best example of related diversification? A. A beer brewer acquiring a maker of aluminum cans B. A manufacturer of canoes diversifying into the production of tennis rackets C. A PC producer deciding to diversify into producing and marketing its own brands of MP3 players and LCD TVs D. A producer of golf clubs and golf bags acquiring a maker of digital cameras E. A supermarket chain acquiring a chain of frozen yogurt shops
answer
C
question
A company pursuing a related diversification strategy would likely address the issue of what additional industries/businesses to diversify into by A. Locating businesses with well-known brand names and large market shares B. Identifying industries with the least competitive intensity C. Identifying an attractive industry whose value chain has good strategic fit with one or more of the firm's present businesses D. Identifying businesses with the potential to diversify the number and types of different activities in the firm's value chain make-up E. Locating new businesses with high degrees of financial fit with its present businesses
answer
C
question
Strategic fit between two or more businesses exists when one or more activities comprising their respective value chains present opportunities 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
E
question
Which of the following statements about cross-business strategic fit in a diversified enterprise is not accurate? A. Strategic fit between two businesses exists when the management know-how accumulated in one business is transferable to the other B. Strategic fit exists when two businesses present opportunities to economize on marketing, selling and distribution costs C. Competitively valuable cross-business strategic fits are what enable related diversification to produce a 1 + 1 = 3 performance outcome D. 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 E. Strategic fit exists when a company can transfer its brand name reputation to the products of a newly acquired business and add to the competitive power of the new business
answer
D
question
Economies of scope A. Are cost reductions that flow from operating in multiple businesses B. Arise only from strategic fit relationships in the production portions of the value chains of sister businesses C. Are more associated with unrelated diversification than related diversification D. Are present whenever diversification satisfies the attractiveness test and the cost-of-entry test E. Arise mainly from strategic fit relationships in the distribution portions of the value chains of unrelated businesses
answer
A
question
A diversified company that leverages the strategic fits of its related businesses into competitive advantage A. Has a distinctive competence in its related businesses B. Has a clear path to achieving 1 + 1 = 3 gains in shareholder value C. Has a clear path to global market leadership in the industries where it has related businesses D. Passes the value chain test and the profit expectations test for building shareholder value E. Achieves economies of scope and passes the reduced-costs test for crafting a diversification strategy capable of creating added shareholder value
answer
B
question
A strategy of diversifying into unrelated businesses A. Is aimed at achieving good financial fit (whereas related diversification aims at good strategic fit) B. Is the best way for a company to pass the attractiveness test in choosing which types of businesses/industries to enter C. Discounts the value and 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 D. Concentrates on diversifying into businesses where a company can leverage use of a well-known brand name in ways that create added value for shareholders E. Generally offers more competitive advantage potential than related diversification
answer
C
question
In diversified companies with unrelated businesses, the strategic attention of top executives tends to be focused on A. Screening acquisition candidates and evaluating the pros and cons or keeping or divesting existing businesses B. Identifying acquisition candidates that can pass the better-off test C. Identifying opportunities to achieve greater economies of scope D. Identifying opportunities to acquire businesses that can benefit from using the parent company's potent brand name E. Identifying acquisition candidates that can pass the capital gains test
answer
A
question
One of the chief advantages of an unrelated diversification strategy is that it A. Expands a firm's competitive advantage opportunities to include a wider array of businesses B. Spreads the stockholders' risks across a group of truly diverse businesses C. Increases strategic fit opportunities and the potential for a 1 + 1 =3 outcome on the bottom line D. Results in having more cash cow businesses than cash hog businesses E. Facilitates capturing the financial fits among sister businesses (as compared to a strategy of related diversification)
answer
B
question
A fundamental weakness of unrelated diversification is A. The tendency of corporate managers to place too much emphasis on investing in cash cows rather than promising cash hogs B. Reducing a company's access to economies of scope C. Greater potential for there to be too much diversity among the competitive strategies of the various business subsidiaries D. The greater risk of getting trapped in tough struggles with strong competitors E. That the greater the number of businesses a company is in and the more diverse they are, the harder it is for corporate managers to stay abreast of what's happening in each industry and each subsidiary, know much about the problems and issues each business confronts and know what to do if a business unit stumbles and its results suddenly head downhill
answer
E
question
To identify a diversified company's strategy, one should consider such factors as A. 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 B. Whether the company is focusing on "milking its cash cows" or "feeding its cash hogs." C. The technological proficiencies, labor skill requirements and functional area strategies characterizing each of the firm's businesses D. Each business's competitive approach—whether it is pursuing a low-cost leadership, differentiation, best-cost, focused differentiation or focused low-cost strategy E. Whether it is emphasizing the pursuit of economies of scale or economies of scope
answer
A
question
When identifying a diversified company's present corporate strategy, which of the following would not be something to look for? A. Recent moves to build positions in new industries B. The company's approach to allocating investment capital and resources across its present businesses C. Recent management actions to strengthen the company's positions in existing businesses D. Recent moves to divest weak or unattractive business units E. Actions over the past few years to substitute global strategies for multi-country strategies in one or more business units
answer
E
question
The procedure for evaluating the pluses and minuses of a diversified company's strategy includes 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 the various businesses the company has diversified into E. All of the above
answer
E
question
A comprehensive evaluation of the group of businesses a company has diversified into involves 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 the above
answer
E
question
Which one of the following is not an important aspect of evaluating the merits of a diversified company's strategy? A. Assessing the competitive strength of each business the company has diversified into B. 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 C. Evaluating the strategic fits and resource fits among the various sister businesses D. Assessing the attractiveness of the industries the company has diversified into, both individually and as a group E. Ranking the performance prospects of the businesses from best to worst and deciding what priority to give each of the company's business units in allocating resources
answer
B
question
In judging the attractiveness of the businesses a multi-business company has diversified into, it is important to 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. Use the industry attractiveness scores to rank the industries from most to least attractive D. Use the industry attractiveness scores to evaluate the attractiveness of all the industries as a group E. All of the above
answer
E
question
Which of the following is not generally something that ought to be considered in evaluating the attractiveness of a diversified company's business makeup? A. Market size and projected growth rate, industry profitability and the intensity of competition B. Industry uncertainty and business risk C. 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 D. Seasonal and cyclical factors, resource requirements and whether an industry has significant social, political, regulatory and environmental problems E. The presence of cross-industry strategic fits
answer
C
question
When industry attractiveness ratings are calculated for each of the industries a multi-business company has diversified into, the results help indicate A. 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 B. Which industries have attractive key success factors and which industries have unattractive key success factors C. Which industries have the biggest economies of scale and which industries have the greatest economies of scope and the overall potential for cost reduction in the industries as a group D. Which industries are most attractive from the standpoint of long-term growth and the growth prospects of all the industries as a group E. Which industries are most attractive from the standpoint of industry driving forces and competitive forces
answer
A
question
Calculating quantitative attractiveness ratings for the industries a diversified company has invested in A. Allows a company to rank the competitive advantage opportunities in each industry from best to worst B. Helps identify which industries have the best/worst prospects for revenue growth C. Identifies which industry has the best/worst value chain from the standpoint of cost reduction potential D. 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 E. Helps identify which industry is likely to be the largest/smallest contributor to the company's growth and profitability
answer
D
question
Assessments of how a diversified company's subsidiaries compare in competitive strength should be based on such factors as A. Vulnerability to seasonal and cyclical downturns, vulnerability to driving forces and vulnerability to fluctuating interest rates and exchange rates B. 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 C. The appeal of its strategy, relative number of competitive capabilities, the number of products in each businesses product line, which businesses have the highest/lowest market shares and which businesses earn the highest/lowest profits before taxes D. The ability to hurdle barriers to entry, value chain attractiveness and business risk E. Cost reduction potential, customer satisfaction potential and comparisons of annual cash flows from operations
answer
B
question
Relative market share is A. 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 B. Calculated by adjusting a company's dollar market share up or down in proportion to whether the company's quality and customer service are above/below the industry-average quality and the industry-average caliber of customer service—this measure is a far superior indicator of whether a business has the ability to compete on the basis of quality and service C. Calculated by dividing a company's market share (based on dollar volume) by the industry-average market share to determine the percentage by which a company's market share is above/below the industry average—this percentage is a better indicator of a business's competitive strength than is just looking at the firm's market share percentage D. Particularly useful in identifying cash cows and cash hogs?cash cow businesses have big relative market shares (above 1.0) and cash hog businesses have low relative market shares (below 0.5) E. Calculated by subtracting the industry-average market share (based on dollar volume) from a company's market share to determine how much a company's market share is above/below the industry average—this amount is a better indicator of a business's competitive strength than is just looking at the firm's market share percentage
answer
A
question
The value of determining the relative competitive strength of each business a company has diversified into is A. To have a quantitative basis for identifying which businesses have large/small competitive advantages or competitive disadvantages vis-à-vis the rivals in their respective industries B. To have a quantitative basis for rating them from strongest to weakest in terms of contributing to the corporate parent's revenue growth C. To compare resource strengths and weaknesses, business by business D. To have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries E. To have a quantitative basis for rating them from strongest to weakest in terms of contributing to the corporate parent's profitability
answer
D
question
The nine-cell industry attractiveness-competitive strength matrix A. Is useful for helping decide which businesses should have high, average and low priorities in allocating corporate resources B. Indicates which businesses are cash hogs and which are cash cows C. Pinpoints what strategies are most appropriate for businesses positioned in the three top cells of the matrix but is less clear about the best strategies for businesses positioned in the bottom six cells D. Identifies which sister businesses have the greatest strategic fit E. Identifies which sister businesses have the greatest resource fit
answer
A
question
The most important strategy-making guidance that comes from drawing a 9-cell industry attractiveness-competitive strength matrix is A. Which businesses in the portfolio have the most potential for strategic fit and resource fit B. Why cash cow businesses are more valuable than cash hog businesses C. 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 D. Which businesses have the biggest competitive advantages and which ones confront serious competitive disadvantages E. Which businesses are in industries with profitable value chains and which are in industries with money-losing value chains
answer
C
question
One of the most significant contributions to strategy-making in diversified companies that the 9-cell industry attractiveness/competitive strength matrix provides is A. Identifying which businesses have strategies that should be continued, which business have strategies that need fine-tuning and which businesses have strategies that need major overhaul B. 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 C. Pinpointing what strategies are most appropriate for businesses positioned in the four corners of the matrix (although the matrix reveals little about the best strategies for businesses positioned in the remainder of the matrix) D. Its ability to pinpoint what kind of competitive advantage or disadvantage each business has E. Pinpointing which businesses to keep and which ones to divest
answer
B
question
In a diversified company, a business subsidiary has more competitive advantage potential when A. It is a cash cow B. 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 C. It is the company's biggest profit producer or is capable of becoming the biggest D. It is in a fast-growing industry E. It operates in an industry where competition is less intense and driving forces are relatively weak
answer
B
question
Checking a diversified firm's business portfolio for the competitive advantage potential of cross-business strategic fits entails consideration of A. Whether the parent's company's competitive advantages are being deployed to maximum advantage in each of its business units B. Whether the competitive strategies employed in each business act to reinforce the competitive power of the strategies employed in the company's other businesses C. Whether the competitive strategies in each business possess good strategic fit with the parent company's corporate strategy D. 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 E. How compatible the competitive strategies of the various sister businesses are and whether these strategies are properly aimed at achieving the same kind of competitive advantage
answer
D
question
Which of the following is not a part of checking a diversified company's business units for cross-business competitive advantage potential? A. Ascertaining the extent to which sister business units have value chain match-ups that offer opportunities to combine the performance of related value chain activities and reduce costs B. Ascertaining the extent to which sister business units have value chain match-ups that offer opportunities to transfer skills or technology or intellectual capital from one business to another C. Ascertaining the extent to which sister business units are making maximum use of the parent company's competitive advantages D. Ascertaining the extent to which sister business units have value chain match-ups that offer opportunities to create new competitive capabilities or to leverage existing resources E. Ascertaining the extent to which sister business units present opportunities to share use of a well-respected brand name
answer
C
question
A diversified company's business units exhibit good resource fit when A. Each business is a cash cow B. 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 C. Each business is sufficiently profitable to generate an attractive return on invested capital D. Each business unit produces large internal cash flows over and above what is needed to build and maintain the business E. The resource requirements of each business exactly match the resources the company has available
answer
B
question
A "cash hog" type of business A. Is one that is losing money and requires cash infusions from its corporate parent to continue operations B. Is one that generates cash flows that are too small to fully fund its operations and growth C. Generates negative cash flows from internal operations and thus requires cash infusions from its corporate parent to report a profit D. Is a business growing so rapidly that it does not have the funds to cover its short- and long-term debt obligations E. Is one that has more current liabilities than current assets and faces a liquidity crisis due to declining sales revenues and declining profitability
answer
B
question
Which one of the following is not part of the task of checking a diversified company's business line-up for adequate resource fit? A. Determining whether the excess cash flows generated by cash cow businesses are sufficient to cover the negative cash flows of its cash hog businesses B. Determining whether recently acquired businesses are acting to strengthen a company's resource base and competitive capabilities or whether they are causing its competitive and managerial resources to be stretched too thinly across its businesses (sometimes newly-acquired businesses soak up a disproportionate share of management's time and put a strain on other company resources) C. 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 D. Determining whether the company has adequate financial strength to fund its different businesses and maintain a healthy credit rating E. Determining whether the corporate parent has or can develop sufficient resource strengths and competitive capabilities to be successful in each of the businesses it has diversified into
answer
C
question
Conclusions about what the priorities should be for allocating resources to the various businesses of a diversified company need to be based on such considerations as A. Each business's profit and growth prospects B. Industry attractiveness and competitive strength of the various businesses—normally strong businesses in attractive industries should carry a higher priority than weak businesses in unattractive industries C. The degree of strategic fit and resource fit with other business units D. Whether and how corporate resources can be used to enhance the competitiveness of particular business units E. All of these
answer
E
question
Which one of the following is not a particularly relevant consideration in deciding what the priorities should be for allocating resources to the various businesses of a diversified company? A. Whether and how corporate resources and capabilities can be used to enhance the competitiveness of particular business units B. What competitive strategy the business is presently using C. Whether a business exhibits good strategic fit and resource fit with sister businesses D. Whether to divest marginal businesses and free up resources for redeployment to higher-opportunity areas E. Industry attractiveness and the competitive strength of the various businesses?normally strong businesses in attractive industries should be given higher priority than weak businesses in unattractive industries
answer
B
question
Which one of the following is not a reasonable option for deploying a diversified company's financial resources? A. Making acquisitions to establish positions in new businesses or to complement existing businesses B. 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 C. Funding long-range R ventures aimed at opening market opportunities in new or existing businesses D. Paying down existing debt, increasing dividends or repurchasing shares of the company's stock E. Investing in ways to strengthen or grow existing businesses
answer
B
question
Moves to improve a diversified company's overall performance include 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 and putting a whole new face on the company's business makeup D. Pursuing growth opportunities in the existing business lineup E. All of these
answer
E
question
The strategic options to improve a diversified company's overall performance do not include which of the following categories of actions? A. Broadening the company's business scope by making new acquisitions in new industries B. Increasing dividend payments to shareholders and/or repurchasing shares of the company's stock C. Restructuring the company's business lineup and putting a whole new face on the company's business makeup D. Pursuing multinational diversification and striving to globalize the operations of several of the company's business units E. Divesting weak-performing businesses and retrenching to a narrower base of business operations
answer
B
question
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? A. Pursue multinational diversification B. Restructure the company's business lineup C. Craft new initiatives to build/enhance the reputation of the company's brand name D. Divest some businesses and retrench to a narrower diversification base E. Broaden the diversification base
answer
C
question
A company that is already diversified may choose to broaden its business base by building positions in new related or unrelated businesses because 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
E
question
Retrenching to a narrower diversification base A. Is usually the most attractive long-run strategy for a broadly diversified company confronted with recession, high interest rates, mounting competitive pressures in several of its businesses and sluggish growth B. 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 C. Is an attractive strategy option for revamping a diverse business lineup that lacks strong cross-business financial fit D. Is sometimes an attractive option for deepening a diversified company's technological expertise and supporting a faster rate of product innovation E. Is a strategy best reserved for companies in poor financial shape
answer
B
question
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? A. When a diversified company has struggled to make certain businesses attractively profitable B. When a diversified company has too many cash cows C. When one or more businesses are cash hogs with questionable long-term potential D. When businesses in once-attractive industries have badly deteriorated E. When a diversified company has businesses that have little or no strategic or resource fits with the "core" businesses that management wishes to concentrate on
answer
B
question
Divestiture can be accomplished by 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 the above E. None of the above—the best and quickest ways to divest a business are either to close it down or else just walk away and give the keys to creditors
answer
D
question
Strategies to restructure a diversified company's business lineup involves A. Revamping the value chains of each of a diversified company's businesses B. Focusing on restoring the profitability of its money-losing businesses and thereby improving the company's overall profitability C. Revamping the strategies of its different businesses, especially those that are performing poorly D. Divesting some businesses and acquiring new ones so as to put a new face on a diversified company's business makeup E. Broadening the scope of diversification to include a larger number of smaller and more diverse businesses
answer
D
question
Conditions that may make corporate restructuring strategies appealing include 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. The appointment of a new CEO with a new or different strategic vision for the company that doesn't include many of the company's present businesses D. Ill-chosen acquisitions that haven't lived up to expectations E. All of these
answer
E
question
What sets a multinational diversification strategy apart from other diversification strategies is A. The presence of extra degrees of strategic fit and more economies of scope B. The potential to have a higher degree of technological expertise C. A diversity of businesses and a diversity of national markets D. The potential for faster growth, higher rates of profitability and more profit sanctuaries E. Greater diversity in the types of value chain activities in its different businesses
answer
C
question
A diversified company may pursue expansion of several of its businesses into the markets of additional foreign countries in order to A. Fully capture economies of scale and learning/experience curve effects in these businesses B. Exploit opportunities for both cross-business and cross-country coordination of value chain activities and strategic initiatives C. Gain the benefits of using cross-country market subsidization techniques D. Transfer competitively valuable resources in these businesses from one country to another E. All of these
answer
E
