Final 2020 Flashcards
On Sunday morning Pete, the CEO of a renowned pet store, is informed that the firm “Cats and Dogs” is planning to take over his firm. Pete, however, is not convinced that “Cats and Dogs” has a long-term strategy in place that he feels comfortable with. He assembles the management team and instructs the CFO to find a different bidding firm. The CFO, informs the management team on Wednesday that the firm “Wiggling Tails” has agreed to acquire the company. Pete is extremely happy with this news as “Wiggling Tails” has a long-term strategy in place that Pete feels fully comfortable with. How can the management response of Pete to the acquisition effort of “Cats and Dogs” be classified? Moreover, is this strategy wealth increasing, neutral, or decreasing?
White knight defense - wealth increasing
A toy manufacturer is considering producing 3D printers for children. The firm is considering one of two options: either making a joint venture with a technology firm, or going it alone. By creating a joint venture he will have a lower likelihood of a huge loss but he will also have a lower upward potential in his cashflows due to having to share any profits. For both situations, besides the volatility, everything else is equal. How does the difference in volatility affect the value of the real option?
The joint venture real option is less valuable than going it alone due to lower volatility
Which statements about the disadvantages of both related and unrelated diversification is CORRECT?
Related diversification suffers mostly from rising management costs and unrelated diversification from losing focus
What are the two main Resource Based View (RBV) assumptions?
Resource immobility and resource heterogeneity
Limit is on the hunt for a new acquisition target. After a diligent search, it stumbles on Method. The market value of Limit before the acquisition is estimated to be € 600 mln, while the market value of Method equals € 200 mln. An independent firm is hired to provide an estimate what the combined market value of Limit and Method would be. This independent firm reports the following probability overview:
Probability: 50%
Estimated combined value: €700 mln
Probability: 50%
Estimated combined value: €800 mln
100 mln < price < 160 mln
In the context of international strategies, the trade-off between local responsiveness and international integration was discussed. Which of the combination of keywords below most adequately match with international integration?
Standardized product, little variance in tastes and preferences, focused on efficiency (economies of scale)
Imagine a joint venture between two ice-cream producers, one having significant financial funds (firm A), another having advanced knowledge about vegan products (firm B). Over the course of the joint venture firm B decides not to share its vegan knowledge although it had promised to do so. How should such a situation be classified?
Moral hazard
What is NOT a typical advantage of product diversification?
Economies of scale
Which of the following strategies is about NOT investing in soft signals because they would show vulnerability to tough strategies pursued by other players?
Lean-and-hungry
Which of the following companies has an above-normal economic performance and a below average accounting performance?
Company A: ROA = 10.4%, WACC = 8.8%, Industry average ROA = 13%
Which statement about corporate control is CORRECT?
Ideally, a related product diversification strategy is managed with cooperative control and unrelated product diversification is managed with competitive control
Imagine that three students from Tilburg University created an app that makes it possible to create written text from a recorded video. This way students can easily transform knowledge clips in written text to create summaries. The founders successfully patented the technology that they use, but they know that incumbent firms will be able to write their own, different type of code in about twelve months. The students therefore heavily invest in marketing to get as many students as possible onto their platform in a short amount of time. They manage to get 70% of the student population to use their app in three months time. To what situation will this likely lead?
Temporary competitive advantage
If a company has only two different activities, which two classifications of the Rumelt/Wrigley method can in that case NOT be disentangled?
Related-constrained diversification versus related-linked diversification
During the course, various measurement of Corporate-Level Strategy were explained. Which measurements score high on reliability?
Simple product count and weighted product count
In the context of strategic alliances, the ‘tit-for-tat’ strategy was discussed as a rather effective strategy. Why is this strategy considered rather effective?
The strategy punishes the alliance partner in the next round, but has the potential for restoring cooperation in the future
