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Administration Policy & Strategy Learn Smart > Learn Smart 8 > Flashcards

Learn Smart 8 Flashcards

1
Q

Which of the following are benefits of acquisition?

A
  • it allows access to hard to find resources and capabilities that work well with those of acquiring company
  • it is quicker than trying to launch a new operation
  • it is a useful way to get over entry barriers, such as building brand awareness
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2
Q

When a firm with a related diversification strategy has businesses that match specialized resource requirements at points along their value chains that are critical for the business’s market success, they are said to have

A

resource fit

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3
Q

Which of the following statements are true of multi business diversification strategies

A
  • combination related-unrelated diversification strategies are attractive to companies with a mix of valuable competitive assets
  • some companies are narrowly diversified around two to five related or unrelated business
  • Some multibusiness enterprises are diversified into unrelated areas but have a group of related businesses within each area
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4
Q

Which of the following are terms that refer to diversification by stating a new business subsidiary from scratch

A
  • internal development
  • corporate venturing
  • new venture development
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5
Q

The crafting of strategic moves to improve a diversified company’s overall performance

A

can be placed into four broad categories of action

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6
Q

The nine-cell attractiveness-strength matrix makes a case for a company to take which of the following actions

A
  • to remove resources from ventures that are low in attractiveness and strength unless they offer superior profit or cash flow opportunity
  • to concentrate resources in business that possess higher degrees of attractiveness and competitive strength
  • to be cautious about investing in companies located intermediately on the grid
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7
Q

Choosing how best to enter a new business

A

depends partially on determining the least costly mode of entry

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8
Q

Which of the following are drawbacks of acquisition

A
  • there are often excessive premiums
  • there can be high integration costs
  • integration of the company into the existing firm can be time consuming
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9
Q

Internal development of a new business is a good idea which of the following conditions are met

A
  • The parent company has the in house resources needed to launch the company
  • there is plenty of time to start the business
  • it is cheaper to enter internally than through an acquisition
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10
Q

The decision to diversify should begin with

A

an economic justification

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11
Q

cross-business strategic fit can exist

A
  • in supply chain activities
  • in customer service activities
  • at various points along the value chain
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12
Q

Corporate brands that do not have a connotation of any specific type of product are known as

A

umbrella brands

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13
Q

Diversified companies that are able to create more value in their businesses than other diversified companies have what is called

A

a parenting advantage

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14
Q

Diversification is not really viewed as a success unless it

A

yields added long term economic value for shareholders

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15
Q

Which of the following are strategic options for increasing a for corporations overall success?

A

-broadening the scope of diversification by entering additional industries

  • retrenching to a narrower scope of diversification by divesting poorly performing businesses
  • sticking closely with the existing business lineup and pursuing opportunities presented by these businesses
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16
Q

Companies practicing unrelated diversification overwhelming enter new business by

A

obtaining an establishment company

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17
Q

Which of the following would be misguided reasons for pursuing unrelated diversification?

A
  • Reducing earnings volatility
  • risk reduction
  • boosting managerial compensation
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18
Q

Which of the following statements are true concerning the ranking of a diversified company’s units from best to worst

A
  • Future revenue and earnings for fast-growing industries usually look superior to those for slow-growing industries
  • The position of different businesses in the nine-cell matrix is a good criteria for identifying high-opportunity and low opportunity businesses
  • the rankings help high level executives prioritize businesses for
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19
Q

Businesses with strategic fit in supply chain activities are able to perform better together by

A
  • sharing logistical resources
  • obtaining volume discounts on incoming components
  • cooperating with common supply chain partners
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20
Q

After a evaluating the strength, attractiveness, and fit of a diversified company’s strategy, the next move is to

A

rank the performance potential of the businesses

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21
Q

the steps involved in creating a diversified company’s corporate strategy include

A
  • establishing investment priorities
  • picking new industries to enter and the means for entering them
  • leveraging cross-business value chain relationships into competitive advantage
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22
Q

the broad categories of action for crafting strategic movies to improve a diversified company’s overall performance include

A
  • widening the companys business scope by making new acquisitions in new industries
  • divesting certain businesses and trenching to a narrower base of business operations
  • sticking closely with the existing business lineup and pursuing opportunities that those businesses present
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23
Q

Diversifying into new industries

A

should be explored when a single business company encounters dwindling opportunities in its principal business

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24
Q

which of the following statements are true about a successful diversification effort

A
  • it must add long term economic value for shareholders

- it must give shareholders value that they cannot get by purchasing different stocks on their own

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25
Q

In an unrelated diversification strategy, managers must ,make sure acquisition candidates have which of the following characteristics

A
  • they are in an industry with attractive growth potential
  • they are big enough to significantly contribute to the parent company’s bottom line
  • they meet corporate targets for profitability and return on investment
26
Q

A good resource fit would include solid parenting capabilities in companies that pursue which of the following

A

an unrelated diversification strategy

27
Q

in order to be a good market for a company to be in, an industry should

A

pass the industry attractiveness test

28
Q

the process of overhauling and streamlining the operations of a business is referred to as

A

restructuring

29
Q

Which of the following statements are true concerning the portfolio approach to ensuring financial fit?

A
  • business units in quickly expanding industries are often cash hogs
  • cash cows have limited growth but are a valuable financial resource
  • the profolio approach relies on the premise that cash flows and investment traits vary among different businesses
30
Q

For which of the following conditions is restructuring a diversified company’s business lineup an attractive course of action

A
  • when the market shares of one or more major business units are decreasing because of superior competition
  • when the interest owed on large debts is greatly reducing profitability
  • when the company has too many businesses in slowly growing or declining industries
31
Q

Which of the following are the ways a company can enter a new business ?

A
  • acquisition
  • joint ventures
  • internal startup
32
Q

In calculating industry attractiveness scores,

A

competition intensity should be heavily weighted

33
Q

Which of the following statements are true of unrelated diversification?

A
  • problems can occur when corporate management makes decisions for businesses they do not know well
  • a very small number of unanticipated problems or mistakes can have a major negative effect on corporate earnings
  • most management teams are not capable of effectively managing a diversified group of unrelated businesses.
34
Q

it makes sense to stick closely with a diversified companys present business lineup when

A
  • the existing business lineup provides ample opportunity for growth
  • the company’s existing businesses match the company’s diversification strategy
  • The current lineup reliability creates economic value for shareholders
35
Q

Companies practicing unrelated diversification overwhelmingly enter new businesses by

A

obtaining an established company

36
Q

The means of entering a new business by buying an existing business is referred to as

A

acquisition

37
Q

Which of the following are true in using cross business strategic fit to create gains in profitability and shareholder value?

A
  • It builds shareholder value in ways that are not possible through stock ownership in a variety of industries
  • The more a company’s businesses are related, the greater the company’s opportunity to turn strategic fit into competitive advantage
  • cross-business strategic fit benefits are possible only through a strategy of related diversification
38
Q

strategic fit

A

allows cross-business sharing of resource that enable value chain activities

39
Q

Which of the following statements are true concerning whether a company has sufficient non-financial resources

A
  • if a company’s strategy is closely tied to moving technologies from existing businesses to new ones, it must develop more resources to supply them
  • the broader the diversification, the greater the concern that corporate executes are overburdened trying to parent too many companies
  • a company’s resource can be overtaxed by making acquisitions and calling on managing to oversee many businesses quickly
40
Q

Which of the following raitings concerning interpretation of competitive strength scores are correct?

A
  • business units with ratings above 6.7 are strong makret contenders in their industries
  • businesses with ratings in the 3.3. to 6.7 range have moderate competitive strength
  • businesses with ratings below 3.3 are in competitively weak market positions
41
Q

Determining whether the premium required to make an acquisition will be worth the extra value gained is an example of answering the question of

A

comparative cost

42
Q

unrelated diversification

A
  • provides very general, lowvalue for the subsidiaries
  • rarely performs better than the sum of what the individual business units could achieve independently
  • provides a limited potential for competitive advantage
43
Q

Factors that can be used to quantify the competitive strengths of a diversified company’s business subsidiaries include

A
  • ability to match or beat rivals on key product attributes
  • relative market share
  • costs relative to competitors costs
44
Q

Retrenching to a narrower diversification base can include which of the following?

A
  • eliminating businesses that have poor strategic fit
  • focusing corporate resources on businesses in a few, carefully selected industries
  • getting out of businesses that are competitively
45
Q

Determining if there are obstacles that block a new company from gaining a foothold and thriving in an industry is an example of answering the strategy based question of

A

entry barriers

46
Q

which of the following are circumstances that indicate a poor fit of nonfinancial resources in a diversified company

A
  • a mismatch exists between a diversifying companys competitive asets and the key success factors of an industry into which it is expanding
  • a core business lacks accumulated resources to deal with the competitive environment of the business into which it has diversified
  • a companys resources are stretched thin in order to assimilate and oversee many new businesses in a short time
47
Q

which of the following statements are true of a nine-cell matrix

A
  • the horizontal axis is divided into regions for strongr, average, and high numbers represent low competitive strength
  • overall attractiveness and strength scores are used to plot business units, which are displayed as bubbles
  • the vertical axis is divided into regions for high, medium, and low attractiveness
48
Q

What questions can be answered by determining the competitive value of strategic fit in diversified companies ?

A
  • how much competitive value will come from the cross-business transfer of skills, technology, or intellectual capital?
  • will leveraging a potent umbrella brand or corporate image strengthen the businesses and increse sales?
  • are the cost savings associated with economies of scope likely to give one or more businesses a cost-based advantage
49
Q

When a companys management decides that it needs to concentrate on a smaller number of businesses, it is a good strategy to

A

retrench to a narrower diversification base

50
Q

Resources whose use is applied across a wide range of industry types are known as

A

general resources

51
Q

when a company’s existing businesses provide opportunities for growth and produce economic value for shareholders

A

adhere to the existing business lineup

52
Q

a company

A

can diversify into related businesses, unrelated businesses or both

53
Q

a company has good financial resource fit if

A
  • each individual business sufficiently contributes to meeting company wide performance targets
  • the company can adequately fund all its businesses while keeping in a good credit rating
  • the company can create enough internal cash flow to provide the capital required by its businesses
54
Q

determining whether the materials needed to start a business can be readily obtained by a company is an example of answering the strategy-based question of

A

critical resources and capabilities

55
Q

Examples of opportunities for strategic fit include

A
  • transferring specialized expertise from the value chain of one business to another
  • sharing costs between businesses by combining their related value chain activities into a single operation
  • exploiting the common use of a well-known brand name
56
Q

Examples of strategic fit in manufacturing include

A
  • the consolidation of production into a smaller number of plants
  • the transfer of expertise in quality control
  • the sharing of cost efficient production methods
57
Q

In answering the question of comparative costs, acquisitions transactions costs include which of the following

A
  • identifying potential targets
  • evaluating potential targets
  • negotiating a price
58
Q

which of the following statements are true of specialized resources?

A
  • their usefulness is limited in applications beyond those which they were created to serve
  • they are leveraged in related diversification
  • their value is evident only when they are used in very specific businesses and industries
59
Q

Examples of strategic fit in sales and marketing include

A
  • using a single sales force
  • reducing billing costs by using common promotional tie-ins
  • promoting products on the same website
60
Q

The three strategy options for pursuing diversification are

A
  • diversifying into unrelated businesses
  • diversifying into related businesses

diversifying into both related and unrelated businesses

61
Q

Which of the following statements are true concerning the cross business allocation of financial resources by parent companies

A
  • parent companies can deliver funds that would otherwise be unavailable owing to poor market conditions
  • there is increased opportunity to add shareholder value because managers are privet to internal information unavailable to external financiers
  • cross-business allocation can be especially advantageous during times of financial market crisis

Administration Policy & Strategy Learn Smart (11 decks)

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