Question 1

Which diversification strategy is based on the idea that the company creates value by applying the distinctive competencies it developed in one line of business to another business activity?

Accepted Answer

A)  A technology acquisition strategy
B)  Related diversification
C)  A restructuring strategy
D)  Total diversification
E)  A taper diversification strategy

Question 2

If a company generates free cash flow,that money technically belongs to shareholders.

Accepted Answer

A) True 
 B)False

Question 3

Research suggests that companies that acquire many businesses over time become expert in this process and so can generate significant value from their acquisitions.

Accepted Answer

A) True 
 B)False

Question 4

Research evidence suggests that small-scale entry into a new business is the best way for an internal venture to succeed.

Accepted Answer

A) True 
 B)False

Question 5

The three main types of diversification strategies are

Accepted Answer

A)  Acquisitions,joint ventures,and divestments.
B)  Acquisitions,mergers,and buy outs.
C)  Acquisitions,internal new ventures,and joint ventures.
D)  Related acquisitions,unrelated acquisitions,and mergers.
E)  Joint ventures,strategic alliances,and long-term contracts.

Question 6

Acquisitions often fail because of

Accepted Answer

A)  poor commercialization.
B)  too much preacquisition screening,which increases the time it takes to enter a market.
C)  large-scale entry.
D)  differences in corporate culture.
E)  slowness in establishing significant market presence.

Question 7

An appropriate reason to diversify is to pool the risk from several business ventures in order to create a more stable income stream.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is (are) the probable consequence(s) of an inability to integrate two divergent corporate cultures after an acquisition?

Accepted Answer

A)  High management turnover
B)  Damaging political tensions between the management of the acquired and acquiring companies
C)  An inability to realize potential gains from synergies
D)  All of these choices
E)  None of these choices

Question 9

Which of the following entry strategies should be used when speed is an important consideration?

Accepted Answer

A)  Internal new venture
B)  Acquisition
C)  Joint venture
D)  Unrelated diversification
E)  Related diversification

Question 10

General organizational competencies refer to competencies

Accepted Answer

A)  existing in individual business units.
B)  existing in individual functional units.
C)  existing in the industry in which a company operates.
D)  that can be procured in the marketplace.
E)  that transcend individual functions or business units.

Question 11

Free cash flow is defined as

Accepted Answer

A)  money in a company's bank account.
B)  government funds given to a company for meeting Environmental Protection Agency (EP
A)  regulations.
C)  additional funds donated by stockholders.
D)  cash in excess of that required to fund investments in the company's industry and to meet any debt commitments.
E)  money borrowed by the company that requires no interest payments.

Question 12

A laundromat and a pool hall together invest in a new store,where customers can wash their clothes and play pool while waiting.This is an example of an internal new venture.

Accepted Answer

A) True 
 B)False

Question 13

Companies that base their diversification strategy on transferring competencies tend to acquire new businesses that are ____ to their existing business activities.

Accepted Answer

A)  unrelated
B)  not comparable
C)  opposed
D)  related
E)  identical

Question 14

In which of the following cases are bureaucratic costs likely to be lowest?

Accepted Answer

A)  A vertically integrated company with five divisions that pursues full integration
B)  A company with five divisions that pursues related diversification based on economies of scope
C)  A company with five divisions that pursues related diversification based on transferring competencies
D)  A company with five divisions that pursues unrelated diversification based on acquisitions and restructuring
E)  A company with twenty divisions that pursues taper integration

Question 15

At its simplest level,a joint venture may be thought of as a(n)

Accepted Answer

A)  merger of two companies.
B)  acquisition of a smaller company by a larger company.
C)  form of strategic outsourcing.
D)  sign of weakness on the part of one of the companies.
E)  corporate partnership.

Question 16

Which of the following may be true for a company pursuing a strategy of unrelated diversification rather than a strategy of related diversification?

Accepted Answer

A)  The company does not have to achieve coordination between business units.
B)  The company has broad organizational competencies that can be transferred.
C)  The company has superior strategic management and organizational design.
D)  All of these choices.
E)  None of these choices.

Question 17

Which of the following statements concerning research and development is correct?

Accepted Answer

A)  Exploratory research is more important than development research.
B)  Development research is more important than exploratory research.
C)  Exploratory research is directed toward commercialization of a new technology.
D)  Development research advances basic science.
E)  Companies with a strong record of internal new venturing excel at both types of research.

Question 18

A strategy based on diversification may fail to add value because companies

Accepted Answer

A)  seek to achieve differentiation instead of low cost.
B)  diversify into areas in which they have some knowledge and miss out on profitable opportunities in other areas.
C)  make acquisitions rather than develop new technologies on their own.
D)  incur bureaucratic costs that exceed the value created by the strategy.
E)  seek to achieve cost leadership instead of differentiation.

Question 19

Economies of scope arise when one or more of a diversified company's business units are able to realize cost-saving or differentiation advantages because they can more effectively pool,share,and utilize resources or capabilities.

Accepted Answer

A) True 
 B)False

Question 20

A diversification strategy based on resource sharing

Accepted Answer

A)  entails a company creating value by applying the distinctive competencies it developed in one line of business to another line of business.
B)  requires the development of new business-level strategies.
C)  can help a company to realize economies of scope.
D)  is a valid way of supporting the generic business-level strategy of differentiation.
E)  increases the accountability of units.

Exam 10: Corporate-Level Strategy: Related and Unrelated Diversification

Free cash flow is defined as

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The three main types of diversification strategies are

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Economies of scope arise when one or more of a diversified company's business units are able to realize cost-saving or differentiation advantages because they can more effectively pool,share,and utilize resources or capabilities.

Correct AnswerverifiedShow Answer

Which of the following entry strategies should be used when speed is an important consideration?

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Companies that base their diversification strategy on transferring competencies tend to acquire new businesses that are ____ to their existing business activities.

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Which of the following statements concerning research and development is correct?

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A laundromat and a pool hall together invest in a new store,where customers can wash their clothes and play pool while waiting.This is an example of an internal new venture.

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At its simplest level,a joint venture may be thought of as a(n)

Correct AnswerverifiedShow Answer

General organizational competencies refer to competencies

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Research suggests that companies that acquire many businesses over time become expert in this process and so can generate significant value from their acquisitions.

Correct AnswerverifiedShow Answer

A diversification strategy based on resource sharing

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A strategy based on diversification may fail to add value because companies

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An appropriate reason to diversify is to pool the risk from several business ventures in order to create a more stable income stream.

Correct AnswerverifiedShow Answer

Acquisitions often fail because of

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In which of the following cases are bureaucratic costs likely to be lowest?

Correct AnswerverifiedShow Answer

Research evidence suggests that small-scale entry into a new business is the best way for an internal venture to succeed.

Correct AnswerverifiedShow Answer

Which of the following may be true for a company pursuing a strategy of unrelated diversification rather than a strategy of related diversification?

Correct AnswerverifiedShow Answer

Which diversification strategy is based on the idea that the company creates value by applying the distinctive competencies it developed in one line of business to another business activity?

Correct AnswerverifiedShow Answer

If a company generates free cash flow,that money technically belongs to shareholders.

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Which of the following is (are) the probable consequence(s) of an inability to integrate two divergent corporate cultures after an acquisition?

Correct AnswerverifiedShow Answer

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