Chapter 6

Question 1

Acquisition

Answer 1

A form of a merger whereby one firm purchases another, often with a combination of cash and stock.

Question 2

Backward Integration

Answer 2

A firm’s acquisition of its suppliers

Question 3

BCG Growth-Share Matrix

Answer 3

A corporate portfolio framework developed by the Boston Consulting Group that categorizes a firm’s business units by the market share that they hold and the growth rate of their respective markets.

Question 4

Conglomerate

Answer 4

A form of diversification in which a firm acquires a business to reduce cyclical fluctuations in cash flows or revenues.

Question 5

Core Competencies

Answer 5

The firm’s key capabilities and collective learning skills that are fundamental to its strategy, performance, and long-term profitability.

Question 6

Corporate Profile

Answer 6

Identification of the industry or industries in which a firm operates.

Question 7

Corporate-Level Strategy

Answer 7

The strategy that top management formulates for the overall company.

Question 8

Divestment

Answer 8

A corporate-level retrenchment strategy in which a firm sells one or more of its business units.

Question 9

External Growth

Answer 9

A corporate-level growth strategy whereby a firm acquires other companies.

Question 10

Forward Integration

Answer 10

A firm’s acquisition of one or more of its buyers.

Question 11

Growth Strategy

Answer 11

A corporate-level strategy designed to increase revenues, and ultimately profits and or market share.

Question 12

Horizontal Integration

Answer 12

A form of acquisition in which a firm expands by acquiring other companies in its same line of business.

Question 13

Horizontal Related Diversification

Answer 13

A form of diversification in which a firm acquires a business outside its present scope of operation but with similar or related core competencies.

Question 14

Internal Growth

Answer 14

A corporate-level growth strategy in which a firm expands by internally increasing its size and sales rather than by acquiring other companies.

Question 15

International Franchising

Answer 15

A form of licensing in which a local franchisee pays a franchiser in another country for the right to use the franchiser’s brand names, promotions, materials, and procedures.

Question 16

International Licensing

Answer 16

An arrangement whereby a foreign licensee purchases the rights to produce a company’s products and/or use its technology in the licensee’s country for a negotiated fee structure.

Question 17

Liquidation

Answer 17

A corporate-level retrenchment strategy in which a firm terminates one or more of its business units by the sale of their assets.

Question 18

Merger

Answer 18

A corporate-level growth strategy in which a firm combines with another firm through an exchange of stock.

Question 19

Retrenchment Strategy

Answer 19

A corporate-level strategy designed to reduce the size of the firm.

Question 20

Stability Strategy

Answer 20

A corporate-level strategy intended to maintain a firm’s present size and current lines of business.

Question 21

Strategic Alliances

Answer 21

A corporate-level growth strategy in which two or more firms agree to share the costs, risks, and benefits associated with pursuing new business opportunities. Strategic alliances are often referred to as partnerships.

Question 22

Synergy

Answer 22

When the combination of two firms results in higher efficiency and effectiveness than would otherwise be achieved by the two firms separately.

Question 23

Turnaround

Answer 23

A corporate-level retrenchment strategy intended to transform the firm into a leaner and more effective business by reducing costs and rethinking the firm’s product lines and target markets.

Question 24

Vertical Integration

Answer 24

A form of integration in which a firm expands by acquiring a company in the distribution channel.