Exam 8: Corporate Strategy

A) 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.
B) is less capital intensive and usually more profitable than unrelated diversification.
C) involves diversifying into industries having the same kinds of key success factors.
D) is less risky than either vertical integration or unrelated diversification due to lower capital requirements.
E) passes the industry attractiveness test and thus offers the best route to 2 + 2 = 4 benefits.

Correct Answer

verified

Show Answer

A) Cash hog
B) Cash cow
C) Cash chest
D) Free cash flow
E) Cash generator

Correct Answer

verified

Show Answer

A) Ascertaining the extent to which 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 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 business units are making maximum use of the parent company's competitive advantages
D) Ascertaining the extent to which 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 business units present opportunities to share use of a well-respected brand name

Correct Answer

verified

Show Answer

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 synergistic performance outcome.
D) Strategic fit is primarily a by-product 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.

Correct Answer

verified

D

A) is useful for helping decide which businesses should have high,average,and low priorities in deploying 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 highest level of resource fit.

Correct Answer

verified

A

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 wants 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,legislative regulations,and new product innovations that alter buyer preferences and resource requirements.
D) it wants to make new acquisitions to strengthen or complement some of its present businesses,market positioning,and competitive capabilities.
E) its top management wants to increase its compensation.

Correct Answer

verified

Show Answer

A) their value chains exhibit competitively valuable cross-business commonalities.
B) the products of the different businesses are bought by many of 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 production methods they employ both entail economies of scale.

Correct Answer

verified

Show Answer

A) diversifying risk across a broad spectrum of businesses.
B) the risk/reward concept of financial analysis.
C) the fact that different businesses have different cash flow and investment characteristics.
D) acknowledging that each business unit has varying degrees of opportunity.
E) acknowledging that each business is financially strong.

Correct Answer

verified

Show Answer

A) a spinoff.
B) a wholly-owned subsidiary.
C) a functional divesture.
D) fully-diluted stock.
E) a restructure.

Correct Answer

verified

Show Answer

A) identifying which businesses have large/small competitive advantages or competitive disadvantages vis-à-vis the rivals in their respective industries.
B) rating them from strongest to weakest in terms of contributing to the corporate parent's revenue growth.
C) comparing resource strengths and weaknesses,business by business.
D) rating them from strongest to weakest in contending for market leadership in their respective industries.
E) rating them from strongest to weakest in terms of contributing to the corporate parent's profitability.

Correct Answer

verified

Show Answer

Correct Answer

verified

Any approach to diversification is fine ...

View Answer

Show Answer

A) sell products from the different businesses to much the same types of buyers and retail outlets.
B) have dissimilar value chains and resource requirements with no competitively important cross-business commonalities at the value chain level.
C) perform better than just the sum of the individual businesses.
D) will always have several key suppliers in common.
E) employ production methods that create economies of scale.

Correct Answer

verified

Show Answer

A) whether the excess cash flows generated by cash cow businesses are sufficient to cover the negative cash flows of its cash hog businesses.
B) whether a business adequately contributes to achieving the corporate parent's performance targets.
C) whether the company has adequate financial strength to fund its different businesses and maintain a healthy credit rating.
D) 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.
E) 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.

Correct Answer

verified

D

A) the difficulties of passing the cost-of-entry test and the ease with which top managers can make the mistake of diversifying into businesses where competition is too intense.
B) the difficulties of capturing financial fit and having insufficient financial resources to spread business risk across many different lines of business.
C) the demanding managerial requirements and the limited competitive advantage potential due to lack of cross-business strategic fit benefits.
D) ending up with too many cash hog businesses and too much diversity among the competitive strategies of the businesses it has diversified into.
E) the difficulties of achieving economies of scope and conflicts/incompatibility among the competitive strategies of the company's different businesses.

Correct Answer

verified

Show Answer

A) a weighted ranking identifies which industries offer the best/worst long-term profit prospects.
B) an unweighted ranking doesn't discriminate between strong and weak industry driving forces and industry competitive forces.
C) it does a more accurate job of singling out which industry key success factors are the most important.
D) an unweighted ranking doesn't help identify which industries have the easiest and hardest value chains to execute.
E) the various measures of attractiveness are not likely to be equally important in determining overall attractiveness.

Correct Answer

verified

Show Answer

Correct Answer

verified

Pros:Where there are opportunities to di...

View Answer

Show Answer

A) the transferring of valuable resources and capabilities from one business to another.
B) combining related value chain activities of different businesses to achieve lower costs.
C) forcing cultural independence,operating diversity,and sophisticated analytical responsibility on the businesses to ensure compatibility with the corporate overhead identity.
D) sharing the use of powerful and well-respected brand names across multiple businesses.
E) encouraging knowledge-sharing and collaborative activity among the businesses.

Correct Answer

verified

Show Answer

A) the pursuit of rapid growth strategies in its most promising businesses.
B) initiating profit improvement or turnaround strategies in weak-performing businesses with potential.
C) the divestiture of unattractive businesses.
D) the pursuit of debt reduction opportunities that can lower the debt/equity ratio while maintaining asset levels.
E) the divestiture of businesses that do not fit into the company's longer term plans.

Correct Answer

verified

Show Answer