Chapter 9 - pt 2

Question 1

strategic control (behavior control)

Answer 1

Controlling subsidiary/unit operations based on whether they engage in desirable strategic behavior (such as cooperation)

Question 2

financial control (output control)

Answer 2

Controlling subsidiary/unit operations strictly based on whether they meet financial output criteria

Question 3

business group

Answer 3

a term to describe a conglomerate, which is often used in emerging economies

Question 4

economic benefit

Answer 4

Benefit brought by the various forms of synergy in the context of diversification

Question 5

bureaucratic cost

Answer 5

additional cost associated with a larger, more diversified organization

Question 6

marginal economic benefit (MEB)

Answer 6

the economic benefit of the last unit of growth (such as the last acquisition)

Question 7

marginal bureaucratic cost (MBC)

Answer 7

the bureaucratic cost of the last unit of organizational expansion (such as the last subsidiary established)

Question 8

refocusing

Answer 8

Narrowing the scope of the firm to focus on a few areas

Question 9

downscoping

Answer 9

reducing the scope of the firm through divestitures and spin-offs

Question 10

downsizing

Answer 10

reducing the number of employees through layoffs, early retirements, and outsourcing

Question 11

merger and acquisition (M&A)

Answer 11

Merging with or acquiring other firms

Question 12

acquisition

Answer 12

the transfer of control of assets, operations, and management from one firm (target) to another (acquirer); the former becomes a unit of the latter

Question 13

merger

Answer 13

the combination of assets, operations, and management of two firms to establish a new legal entity

Question 14

horizontal M&A

Answer 14

an M&A deal involving competing firms in the same industry

Question 15

vertical M&A

Answer 15

an M&A deal involving suppliers (upstream) and/ or buyers (downstream)

Question 16

conglomerate M&A

Answer 16

an M&A deal involving firms in product-unrelated industries

Question 17

friendly M&A

Answer 17

an M&A deal in which the board and management of a target firm agree to the transaction

Question 18

hostile M&A (hostile takeover)

Answer 18

an M&A deal undertaken against the wishes of
target firm’s board and management, who reject the M&A offer

Question 19

hubris

Answer 19

Managers’ overconfidence in their capabilities

Question 20

acquisition premium

Answer 20

the difference between the acquisition price and the market value of target firms

Question 21

strategic fit

Answer 21

the complementarity of partner firms’ “hard” skills and resources, such as technology, capital, and distribution channels

Question 22

organizational fit

Answer 22

the complementarity of partner firms’ “soft” organizational traits, such as goals, experiences, and behaviors, that facilitate cooperation

Question 23

dominant logic

Answer 23

a common underlying theme that connects various businesses in a diversified firm

Question 24

institutional relatedness

Answer 24

a firm’s informal linkages with dominant institutions in the environment that confer resources and legitimacy

Question 25

restructuring

Answer 25

reducing firm size, scope, and complexity