Econ 136 Chapter 8 Business Strategy

Which of the following are circumstances that indicate a poor fit of non financial resources in a diversified company?

- a core business lacks accumulated resources to deal with the competitive advantage environment of the business into which it has delivered -a company's resources are stretched thin in order to assimilate and oversee many new businesses in a short time -a mismatch exists between a diversifying company's competitive assets and the key success factors of an industry into which it is expanding

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

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

When a company's existing businesses provide opportunities for growth and produce economic value for shareholders, it make sense to

-adhere to the existing business lineup

Which of the following are strategic options for increasing a corporation's overall success?

-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

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

-cash cows have limited growth but are a valuable financial resource -business units in quickly expanding industries are often cash hogs -the portfolio approach relies on the premise that cash flow and investments traits vary among different businesses

Steps involved in assessing the positive and negative aspects of a diversified company's strategy and determining how to improve performance include which of the following?

-determining the competitive strength of the company's business units -determining if the firm's resources fit the requirements of its current lineup -evaluating the individual and group attractiveness of the industries the company has diversified into

The three strategy options for pursuing diversifications are

-diversifying into undefined businesses -diversifying into related businesses -diversifying into both related and unrelated businesses

In answering the question of comparative costs, acquisition transaction costs include which of the following?

-evaluating potential targets -identifying potential targets -negotiating a price

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

-focusing corporate resources on businesses in a few, carefully selected industries -eliminating businesses that have poor strategic fit -getting out of business that are completely weak

Restructuring a business

-generally involves in liquidating underutilized assets -often entails transferring experiences managers to the newly acquired business -usually entails transferring experiences managers to the newly acquired business

The nine-cell attractiveness-strength matrix

-identifies the industry attractiveness of businesses -helps diversified companies allocate resources among their businesses -identifies the business strength of business

Cross-business strategic fit can exist

-in supply chain activities -at various point along the value chain activity -in customer service activities

Which of the following are benefits of acquisition?

-it allows access to hard-to-find resources and capabilities that work well with those of the 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

Which of the following statements are true about a successful diversification effort?

-it must give shareholders value that they cannot get by purchasing different stocks on their own -it must add long-term economic value for shareholders

The steps involved in creating a diversified company's corporate strategy include

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

Strategic options for allocating company financial resources include which of the following?

-making acquisitions to establish positions in new industries or to compliment existing businesses -funding long range R&D ventures aimed at opening market opportunities in new or existing businesses -investing in ways to strengthen or grow existing businesses

In order to pass the three tests of a corporate advantage, executives must

-negotiate favorable acquisition prices -do a superior job of corporate parenting via high-level managerial oversight -diversify into industries where the businesses can produce consistently goo earnings and return on investment

Which of the following statements are true of a nine-cell matrix?

-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 -the horizontal axis is divided into regions for strong, average, and weak competitive strength

Which of the would be misguided reasons to pursuing unrealated diversification?

-risk education -reducing earnings volatility -boosting managerial compensation

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

-the broader the diversification, the greater the concern that corporate executives are overburdened trying to parent too many companies -If a company's strategy is closely tied to moving technologies from existing business to new ones, it must develop more resources to supply them. -A company's resources can be overtaxed by making many acquisitions and calling on management to oversee many business quickly

Internal developments of a new business is a good idea when which of the following conditions are met?

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

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

-umbrella brands

Corporate parents effectively contribute to the success of their business

-utilizing popular umbrella brands -providing general resources that lower their operating costs

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

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

The broad categories of action for crafting strategic moves to improve a diversified company's overall performance include

-widening the company's business scope by making new acquisition's 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 business present

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

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

The portfolio approach to financial fit revolves around the fact that

cash flow and investment characteristics vary among businesses.

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

critical resources and capabilities.

Choosing how best to enter a new business

depends partially on determining the least costly mode of entry.

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

entry barriers.

A diversified company can add value by shifting capital from business units generating free cash flow to those needing capital to grow by having a strong

internal capital market

In order for a diversified company to perform well

much of its revenues and profits should be derived from business units with comparatively high attractiveness scores.

Companies practicing unrelated diversification overwhelmingly enter new businesses by

obtaining an established company

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

resource fit

Diversifying into new industries

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

Determining how rapidly an industry is changing is crucial to answering the question of__________ when choosing a mode of entry.

speed

A diversified company in which one core business accounts accounts for 50% to 80% of total revenues and other businesses account for the remainder is known as

a dominant-business entreprise

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

a parenting advantage

The decision to diversify should begin with

an economic justification

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

an unrelated diversification strategy.

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

can be placed into four broad categories of action.

A company

can diversify into related businesses, unrelated businesses, or both.

Which of the following is true about joint ventures?

they are usually short-lived, ending as soon as the partners decide to part ways

One method of broadening a company's diversification base is to add businesses that will complement and strengthen the market position of businesses in industries where the company has a stake.

true

Strategic uses of corporate resources should usually take precedence over financial options.

true

Diversification is not really viewed as a success unless it

yields added long-term economic value for shareholders

Business units with competitive-strength ratings

above 6.7 are strong market contenders in their industries

A diversified company's base can be broadened by

acquiring more businesses and building positions in new industries.

Which statement is true concerning the pursuit of growth through unrelated diversification?

it can be misguided if the growth is not profitable

Which of the following is true concerning relative market share?

the further below 1 a business unit's relative market share is, the weaker its competitive strength and market position with its rivals