Exam 8: Corporate Strategy: Diversification and the Multibusiness Company

A) the company has ample time and adequate resources to launch the new internal startup business from the ground up.
B) there is a small pool of desirable acquisition candidates.
C) the target industry is growing rapidly and no good joint venture partners are available.
D) all of the potential acquisition candidates are losing money.
E) the target industry is comprised of several relatively large and well-established firms.

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A) locating businesses with well-known brand names and large market shares.
B) identifying industries with the least competitive intensity.
C) identifying an attractive industry whose value chain has good strategic fit with one or more of the firm's present businesses.
D) identifying businesses with the potential to diversify the number and types of different activities in the firm's value chain makeup.
E) locating new businesses with high degrees of financial fit with its present businesses.

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A) Corporate venturing,corporate entrepreneurship,or intrapreneurship.
B) Value chain integration.
C) Resource capability process.
D) Diversification activity capabilities.
E) All of these.

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A) the pre-acquisition market value of the target company.
B) the fair market value of similar companies in the same geographic locale.
C) the comparable value of similar companies within the same market.
D) the amount paid as a down payment to be held in escrow until closing.
E) the difference between the amount that was offered and the amount that is escrowed.

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A) picking the new industries to enter and deciding on the means of entry.
B) initiating actions to boost the combined performance of the businesses the firm has entered.
C) pursuing opportunities to leverage cross-business value chain relationships and strategic fit into competitive advantage.
D) establishing investment priorities and steering corporate resources into the most attractive business units.
E) All of these.

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A) a company's profits are being squeezed and it needs to increase its net profit margins and return on investment.
B) a company lacks sustainable competitive advantage in its present business.
C) a company begins to encounter diminishing market growth and stagnating sales prospects in its mainstay business.
D) a company has run out of ways to achieve a distinctive competence in its present business.
E) a company is under the gun to create a more attractive and cost-efficient value chain.

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A) outsourcing most of the value chain activities that have to be performed in the target business/industry.
B) acquiring a company already operating in the target industry,creating a new business subsidiary to compete in the target industry,or forming a joint venture with another company to enter the target industry.
C) integrating forward or backward into the target industry.
D) shifting from a strategic group comprised mostly of single-business companies to a strategic group comprised of diversified companies.
E) employing an offensive strategy with new product innovation as its centerpiece.

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A) involve making major changes in a diversified company's business lineup,divesting some businesses and/or acquiring others,so as to put a whole new face on the company's business lineup.
B) entail reducing the scope of diversification to a smaller number of businesses.
C) entail selling off marginal businesses to free up resources for redeployment to the remaining businesses.
D) focus on crafting initiatives to restore a diversified company's money-losing businesses to profitability.
E) focus on broadening the scope of diversification to include a larger number of businesses and boost the company's growth and profitability.

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A) has integrated backward and forward as far as it can.
B) is faced with diminishing market opportunities and stagnating sales in its principal business.
C) has achieved industry leadership in its main line of business.
D) encounters declining profits in its mainstay business.
E) faces strong competition and is struggling to earn a good profit.

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A) allows a company to rank the competitive advantage opportunities in each industry from best to worst.
B) helps identify which industries have the best/worst prospects for revenue growth.
C) identifies which industry has the best/worst value chain from the standpoint of cost reduction potential.
D) provides a basis for deciding whether a diversified company has good prospects for growth and profitability,given the attractiveness ratings of the industries in which it has business interests.
E) helps identify which industry is likely to be the largest/smallest contributor to the company's growth and profitability.

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A) a firm is missing some essential skills,capabilities,or resources and needs a partner to supply the missing expertise and competencies or fill the resource gaps.
B) it needs access to economies of scope and good financial fits in order to be cost-competitive.
C) it is uneconomical for the firm to achieve economies of scope on its own initiative.
D) the firm has no prior experience with diversification.
E) it has not built up a hoard of cash with which to finance a diversification effort.

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A) The first uses a business-level strategy,while the second uses a set of business strategies and a corporate strategy.
B) The first uses a business-level strategy,while the second uses a corporate-wide strategy.
C) The first uses an operating strategy,while the second uses a business-line strategy.
D) The first uses a functional strategy,while the second uses a business-line strategy.
E) All of these.

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A) opportunities to combine the performance of certain cross-business activities and thereby reduce costs.
B) opportunities to transfer skills,technology,or intellectual capital from one business to another.
C) opportunities for the company's different businesses to share use of a well-respected brand name.
D) opportunities for sister businesses to collaborate in creating valuable new competitive capabilities.
E) All of these.

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A) The ability to spread business risk over truly diverse industries (as compared to related diversification which is limited to spreading risk only among businesses with strategic fit) .
B) An ability to employ the company's financial resources to maximum advantage by investing in whatever industries/businesses offer the best profit prospects.
C) The ability of superior top management to cope with the wide variety of problems encountered in managing a broadly diversified group of businesses.
D) A potential for achieving somewhat more stable corporate sales and profits over the course of economic upswings and downswings (to the extent the company diversifies into businesses whose ups and downs tend to occur at different times) .
E) The potential to grow shareholder value by investing in bargain-priced or struggling companies with big upside profit potential,turning their operations around fairly quickly with infusions of cash and managerial know-how,and then riding the crest of higher profitability.

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a) Relative market share refers to a com...

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A) Cash hog.
B) Cash cow.
C) Cash flow.
D) Free cash flow.
E) Cash generator.

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