MGMT425 8 – Flashcards

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.

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

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.

Diversification becomes a relevant strategic option when a company 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.

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.

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.

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 a company 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.

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.

Which of the following is an important appeal of a related diversification strategy? A) Related diversification is an effective way of capturing valuable financial fit benefits. B) Related diversification offers more competitive advantage potential than does unrelated diversification. C) Related diversification offers significant opportunities to strongly differentiate a company's product offerings from those of rivals. D) Related diversification is more likely to pass the cost-of-entry test and the capital gains test than unrelated diversification. E) Related diversification is typically more profitable than unrelated diversification, which is a major factor in helping related diversification pass the attractiveness test.

Businesses are said to be "related" when A) they have several key suppliers and several key customers in common. B) their value chains have the same number of primary activities. C) their products are both sold through retailers. D) 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. E) many consumers buy the products/services of both businesses.

Which of the following is not one of the appeals of related diversification? A) It can offer opportunities for transferring expertise, technology, and other capabilities from one business to another. B) It can offer opportunities for reducing costs and for leveraging use of a competitively powerful brand name. C) Related diversification is particularly well-suited for the use of first-mover strategies and capturing valuable financial fits. D) It may present opportunities for cross-business collaboration to create valuable new competencies and capabilities. E) The relatedness among the different businesses provides sharper focus for managing diversification and a useful degree of strategic unity across the company's various business activities.

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.

One strategic fit-based approach to related diversification would be to A) diversify into new industries that present opportunities to transfer competitively valuable expertise, technological know-how, or other capabilities from one business to another. B) diversify into those industries where the same kinds of driving forces and competitive forces prevail, thus allowing use of much the same competitive strategy in all of the business a company is in. C) acquire rival firms that have broader product lines so as to give the company access to a wider range of buyer groups. D) acquire companies in forward distribution channels (wholesalers and/or retailers). E) expand into foreign markets where the firm currently does no business.

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.

The best place to look for cross-business strategic fits is A) in R and technology activities. B) in supply chain activities. C) in sales and marketing activities. D) in production and distribution activities. E) anywhere along the respective value chains of related businesses—no one place is best.

Cross-business strategic fits can be found A) in unrelated as well as related businesses and in the markets of foreign countries as well as in domestic markets. B) only in businesses whose products/services satisfy the same general types of buyer needs and preferences. C) mainly in either technology related activities or sales and marketing activities. D) chiefly in the R portions of the value chains of unrelated businesses E) anywhere along the respective value chains of related businesses.

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.

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.

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

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 its present business lineup. E) All of the above.

Which of the following is not a major consideration in evaluating the pluses and minuses of a diversified company's strategy? A) Checking whether the company's resources fit the requirements of its present business lineup B) Scrutinizing each industry/business to determine where driving forces are strongest/weakest and how many profitable strategic groups the company has diversified into C) Ranking the performance prospects of the various businesses from best to worst and determining what the corporate parent's priorities should be in allocating resources to its different businesses D) Checking the competitive advantage potential of cross-business strategic fits E) Assessing the competitive strength of each business the company has diversified into and determining which ones are strong/weak contenders in their respective industries

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.

Evaluating a diversified company's corporate strategy and critiquing the pluses and minuses of its business lineup involves A) a SWOT analysis of each industry in which the firm has a business interest. B) applying the cost-of-entry test, the better-off test, the profitability test, and the shareholder value test to each business and industry represented in the company's business portfolio. C) 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. D) looking at each industry/business to determine how many profitable strategic groups that the company has diversified into. E) determining how many of the business units are following focus strategies, differentiation strategies, best-cost provider strategies, and low-cost leadership strategies.

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