chapter 6 (2) Flashcards
What is unrelated diversification?
A) The strategy of entering new markets within the same industry
B) The strategy of entering industries or markets that are different from the company’s existing operations
C) The strategy of expanding into international markets with similar products
D) The strategy of acquiring competitors in the same industry
b
With unrelated diversification, potential benefits can be gained from vertical or hierarchical
relationships; that is, the creation of synergies from the interaction of the corporate office with
outside stakeholders.
F.with
the individual business units.
What is “parenting” in the context of corporate strategy?
A) The strategy of managing and overseeing business units within a corporation
B) The decision to outsource all business functions to external suppliers
C) The act of merging two similar companies to reduce competition
D) The process of selling off subsidiaries to focus on core businesses
A
What is the main benefit of parenting for a diversified corporation?
A) Increased control over individual business units
B) Positive contributions that enhance business unit performance through management expertise and competent central functions
C) The ability to acquire competitors and consolidate market share
D) The reduction of operational costs by eliminating business units
b
What role does the corporate office play in creating value through parenting?
A) Managing day-to-day operations of individual business units
B) Improving plans, budgets, and providing central functions such as legal, financial, human resource management, and procurement
C) Focusing solely on the acquisition of new companies
D) Reducing the number of subsidiaries to streamline operations
b
Diversified public corporations, such as Berkshire Hathaway and Virgin Group, create value
through management expertise by improving plans and budgets. This is an example of a
related diversification strategy.
F. unrelated, parenting
Creating value within business units can happen when the corporate office helps subsidiaries
make wise choices in their own acquisitions, divestures, and new ventures. This is known as
A. parenting.
B. restructuring.
C. leveraging core
competencies.
D. increasing market
power.
A
Which of the following is a key function that parent companies typically provide to subsidiaries?
A) Production and manufacturing oversight
B) Legal, financial, human resource management, and procurement support
C) Complete autonomy for decision-making within the subsidiaries
D) Direct supervision of day-to-day operations at the subsidiary level
b
What role does the corporate office play in helping subsidiaries make acquisitions and divestitures?
A) The corporate office provides financial resources to subsidiaries to purchase competitors
B) The corporate office helps subsidiaries make wise choices regarding acquisitions, divestitures, and new ventures by offering strategic guidance and management expertise
C) The corporate office forces subsidiaries to only make acquisitions that align with the parent company’s existing products
D) The corporate office mandates subsidiaries to divest all non-profitable business units immediately
b
What is the central idea behind restructuring as a value-addition strategy?
A) “Buy low and sell high,” focusing on acquiring poorly performing firms with unrealized potential or firms in industries on the verge of positive change
B) “Sell high and buy low,” focusing on selling off assets in profitable firms and reinvesting in underperforming companies
C) “Invest in the future,” focusing on acquiring businesses in emerging markets with high growth potential
D) “Buy established, successful companies and hold indefinitely”
A
Which of the following is NOT a parent intervention strategy during restructuring?
A) Selling off underperforming parts of the business
B) Introducing new technologies, processes, and reward systems
C) Acquiring competitors in the same industry to consolidate market share
D) Reducing payroll and eliminating unnecessary expenses
c
What are the typical outcomes after a company has undergone restructuring?
A) The company must liquidate all its assets
B) The company can either sell the business at a higher value or retain it for financial and competitive benefits
C) The company typically downsizes and exits all markets
D) The company focuses on increasing operational costs to boost short-term profits
b
Restructuring requires the corporate office to find either poorly performing firms with unrealized
potential or firms in industries on the threshold of significant, positive change
t
Loews Corporation, a conglomerate with 15 billion USD in revenues, competes across several
industries including oil and gas, tobacco, watches, insurance, and hotels. Its related
diversification strategy is to buy low and sell high as in the example where they bought six oil
tankers for 5 million USD and then sold them eight years later for 50 million USD.
F. unrelated
What industries might be considered high-risk in a restructuring strategy?
A) Technology and software
B) Oil and gas
C) Consumer goods
D) Financial services
b
Which of the following is an important factor when considering restructuring in unfamiliar industries?
A) The ability to hold onto underperforming assets for long periods
B) The need for the necessary skills, expertise, and resources to turn around the business
C) A focus on merging with local competitors rather than improving existing operations
D) The strategy of selling off all assets to reduce company size
b
Creating value within business units can happen when a firm tries to find and acquire either
poorly performing firms with unrealized potential or firms in industries on the threshold of
significant, positive change. This action is known as
A. restructuring.
B. leveraging core
competencies.
C. parenting.
D. sharing
activities.
a
According to the text, corporate restructuring includes
A. capital restructuring, asset restructuring, and technology
restructuring.
B. capital restructuring, asset restructuring, and management
restructuring.
C. management restructuring, financial restructuring, and procurement
restructuring.
D. global diversification, capital restructuring, and asset
restructuring.
b
What does asset restructuring typically involve?
A) Acquiring new businesses to diversify the company’s portfolio
B) Selling unproductive or peripheral assets, and sometimes acquiring assets that strengthen the core business
C) Increasing the debt-to-equity ratio to leverage more financial resources
D) Changing the organizational structure and leadership of the company
b
Which of the following is an example of capital restructuring?
A) Selling off non-core business units to focus on the main operations
B) Changing the debt-equity mix, such as substituting equity with debt or issuing new equity capital
C) Reorganizing the company’s leadership team
D) Cutting costs by reducing staff and outsourcing operations
b
What is typically involved in management restructuring?
A) Reducing the number of subsidiaries and focusing only on the core business
B) Changing top management team composition, organizational structure, and reporting relationships
C) Reorganizing the debt structure to reduce financial risk
D) Selling off unproductive assets to improve cash flow
b
Which of the following is a common practice in management restructuring?
A) Tightening financial controls and rewarding performance based on short- to medium-term goals
B) Reducing the company’s debt levels by selling off core assets
C) Eliminating the need for top management oversight
D) Acquiring other businesses to diversify the company’s risk
a
Which of the following is a typical outcome of asset restructuring?
A) Increased organizational complexity by adding new subsidiaries
B) A more focused and efficient company that concentrates on its core strengths
C) A reduction in the company’s equity capital through buybacks
D) Expansion into new product lines without a clear strategy
b
What is the primary aim of portfolio management?
A) To create new corporate-level strategies for all businesses within the company
B) To assess competitive positioning and manage resource allocation across a portfolio of businesses
C) To increase the size of a company’s portfolio by acquiring unrelated businesses
D) To centralize decision-making processes within individual business units
b
Portfolio management matrices are applied to what level of strategy?
A. departmental
level
B. business
level
C. corporate
level
D. international
level
c
