Chapter 6 Flashcards
Movement into adjacent markets by a firm along its own value chain can be best termed _________.
a) horizontal diversification
b) vertical integration
c) horizontal specialization
d) unrelated diversification
b) vertical integration
The movement into an adjacent, or unrelated, market that is not along a firm’s own value chain defines the term _________.
a) horizontal diversification
b) vertical specialization
c) backward integration
d) forward integration
a) horizontal diversification
Which of the following is an example of a horizontal diversification?
a) A company acquiring its raw materials from many parts of the world
b) An old company increasing its supply of existing products
c) A new company trying to reintroduce an old product with improved advertising tactics
d) A new company selling a new product in the market
d) A new company selling a new product in the market
Saturn Inc. is an e-commerce company that sells home appliances. The firm recently started selling its line of packaged food items online. In this scenario, Saturn Inc. chose _________.
a) related-constrained diversification
b) related-linked diversification
c) unrelated-constrained diversification
d) unrelated-linked diversification
b) related-linked diversification
Spring Resources LLC creates unique value by establishing a learning organization that coordinates various production tactics and assimilates different types of technologies. This knowledge is distributed to the entire organization so that its branches can adapt and perform according to their own markets. These tactics and technologies distributed throughout the organization that create value for Spring Resources LLC are termed _________.
a) dominant logic
b) core competencies
c) prestige development
d) inimitability practices
b) core competencies
Elegant Meals Inc., a company that owns a chain of restaurants, sells dinnerware to its customers who fancy them. Since their restaurants are known for their interior designs, they also sell home décor products. By selling these products, Elegant Meals Inc. caters to a(n) _________.
a) adjacent market
b) capital market
c) entertainment market
d) global market
a) adjacent market
Stacy works as a manager at Daffodils Corp., a manufacturing firm that has not been performing well. Despite the availability of research materials and databases, she uses her own experience to make acquisitions because she is usually very confident about the success of her plans. This attitude of Stacy can be termed _________.
a) hubris
b) solipsism
c) megalomania
d) selfishness
a) hubris
Lee, the CEO of Libra Inc., decided that the best way to diversify this food processing company would be to set up its own small-scale beverage producing unit in a new area where its new products would have high demands. This decision by Lee best reflects a(n) _________.
a) brownfield entry
b) merger
c) acquisition
d) greenfield entry
d) greenfield entry
BestBrew Corp. and True Coffee Inc. were two leading coffee manufacturing firms. They united and created a whole new firm called True Brew Inc. that used the best customer front-end and operational back-end processes of the two firms. This union is an example of a _________.
a) greenfield entry
b) brownfield entry
c) takeover
d) merger
d) merger
According to the Boston Consulting Group’s growth share matrix, which of the following is true of stars?
a) They are business units that require significant investment and effective strategic management.
b) They are business units that combine high share with high growth and smart managers should invest heavily in these units to improve their position over time.
c) They are business units that have low share and low growth and add little profitability to a company’s overall portfolio businesses.
d) They are business units that have high share but low growth and which can generate large cash flows that can be used to fund growth businesses.
b) They are business units that combine high share with high growth and smart managers should invest heavily in these units to improve their position over time.
Which of the following statements represents related-constrained diversification?
a) A firm that earns more than 70 percent of its revenue from its main line of business and the remainder from other lines across different value chains
b) A firm earning more than 95 percent of the revenues from a single line of business
c) A firm that earns more than 70 percent of its revenue from its main line of business and the rest from businesses located along the value chain
d) A firm that earns less than 70 percent of its revenue from its main line of business and whose other lines of business share product, technological, and distribution linkages with the main business
d) A firm that earns less than 70 percent of its revenue from its main line of business and whose other lines of business share product, technological, and distribution linkages with the main business
In the context of the six Ss, synergy occurs when ________.
a) different elements of a system interact in a way that creates more value together than the elements create separately
b) a company acquires unused redundant resources during an acquisition that expands slack
c) managers of a company conceptualize the business and make critical human resource allocation decisions
d) the combined business delivers the same value every time to new or existing customers as it did before diversification
a) different elements of a system interact in a way that creates more value together than the elements create separately
Under which of the following conditions should a firm ideally choose the acquisition mode of entry?
a) When it can afford to enter new arenas slowly
b) When its industry favors competitors with small scale
c) When its industry is characterized by a steep learning or experience curve
d) When its industry demands standardized knowledge and skills that can be easily gained
c) When its industry is characterized by a steep learning or experience curve
A firm earning more than 95 percent of the revenues from a single line of business is known as a ______
single business
