Management Exam 2

Research shows that about __ % of mergers and acquisitions are successful 20 40 60 80

20%

Managers perceive internal product development as a high-risk activity and tend to choose acquisitions because approximately ______ percent of innovations are imitated within 4 years after patents are obtained. a. 5 b. 10 c. 60 d. 20

60

Usually a company is classified as a single business firm when revenues generated by the dominant business are greater than ____ percent. a. 99 b. 95 c. 90 d. 70

95

Hilliard Pharm and Ahrens Vitamins have high market commonality, both geographically and in the market segments they compete. Hilliard, the number 2 firm in the industry, has undertaken a major strategic attack on Ahrens, the market leader. Which of the following statements is most likely to be TRUE? a. Ahrens will not respond aggressively since this is a strategic move and not a tactical action b. As the market leader, Ahrens has little to fear from an attack by Hilliard and will not expend organizational slack on a major response c. Ahrens will respond aggressively bc of high multimarket contact between Hilliard and Ahrens d. Ahrens will respond after a long delay as the nutrition supplement industry is a slow-cycle industry

Ahrens will respond aggressively bc of the high multi market contact between Hilliard and Ahrens

Ambrose is a scientist working for a pharmaceutical company. His company was acquired by a rival pharmaceutical company, and now it is involved in downsizing and downscoping. Ambrose is concerned about his job security, since he is actively involved in amateur sports in his community and does not wish to disrupt his current lifestyle. Ambrose's job will be most likely to be secure if a. Ambrose's research is in a non-core activity. b. the acquisition has been financed by junk bonds. c. Ambrose is in a position to take a poison pill. d. Ambrose is a key employee in the firm's primary business

Ambrose is a key employee in firm's primary business

Bubble-Up, Inc., is a small manufacturer of educational toys for children under age 10. It has co-existed with three other competitors in the educational toy industry for over 20 years, each of them maintaining a stable market share. There is a wide-spread rumor that Mega-Toy, Inc., the market leader in the broad children's toy market, has decided to target educational toys. Which of these statements is most likely TRUE? a. The owners of Bubble-Up are unconcerned about Mega-Toy's entry to the market because of the resource dissimilarity between the firms. b. Bubble-Up's greater organizational slack will allow it to aggressively attack Mega-Toy. c. Bubble-Up's smaller size may make it more flexible in introducing innovations than Mega-Toy. d. Competitive rivalry will not increase for Bubble-Up because Mega-Toy is not dependent on the educational toy market.

Bubble-up's smaller size may make it more flexible in introducing innovations than Mega-Toy

The ability of Disney to maintain its competitive advantage through proprietary rights to its characters would be severely weakened if a. theme parks with alternative cartoon characters were built in large numbers b. numerous lawsuits against copyright thieves tainted the reputation of the company c. Disney attempted to move beyond its traditional industry d. Disney's cartoon characters became widely perceived as old-fashioned and unappealing

Disney's cartoon characters became widely perceived as old-fashioned and unappealing

In the current global landscape, firms from North America and Europe use the acquisition strategy more frequently than firms from other nations

False

Which company below committed significant resources to enter the information services market and, given its success, was imitated by other competitors? a. Compaq b. IBM c. HP d. Dell

IBM

Which of the following is an example of a tactical action? a. Walmart's launch of Sam's club stores b. Continental airlines exit from a hub airport in Denver c. Netflix beginning to offer music DVDs in addition to movies d. Dell's launch of a new line of high performance, custom-made PCs

Netflix beginning to offer music DVDs in addition to movies

Pappelbon Enterprises recently acquired a chain of convenience stores offering both fuel and food. Pappelbon is now surprised and dismayed to find that the gas pumps have been poorly maintained and will need to be replaced at considerable expense. Each of the following statements accurately reflect this EXCEPT a. Pappelbon did not fully evaluate the target. b. Pappelbon overpaid. c. Pappelbon's due diligence was not fully effective. d. Pappelbon's management was overly focused on acquisitions

Pappelbon's management was overly focused on acquisitions

Speciality Steel, Inc needs a particular type of brick to line its kilns to achieve high temperatures need for the steel. The clay to make this brick is very rare and only two brick plants in the US make it, SS buys one. The other manufacturer has developed an inexpensive new technology where ordinary clay can make this brick. This significantly reduces the product cost of this type of brick. a. SS has less flexibility than if it were not vertically integrated b. example of capacity balance problem c. result of conflicts of interest between managers of the brick plant and executives of SS d. market power of SS has been de-integrated

SS has less flexibility than if it were not vertically integrated

Which of the following is true of southwest airlines? a. unusual low amount of flexibility for a large firm b. success is largely due to the fact it has little market commonality with other airlines c. decision-making responsibility is centered at Dallas headquarters, which allows the firm to respond quickly to competitive attacks d. advantage lies in its ability to "think small"

Southwest's advantage lies in its ability to "think small"

Xanadu, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same industry in Ireland. It plans to transfer one of its key managers from its plant in St. Louis to Ireland. What is the major threat to Xanadu's plan to transfer competencies from itself to the Irish firm? a. The St. Louis manager may quit Xanadu in order to remain in St. Louis. b. American pharmaceutical manufacturing techniques may not transfer to Ireland. c. Irish managers will refuse to take direction from a foreign executive. d. The cost of transferring U.S. managers overseas is usually not cost-effective.

St. Louis manger may quit Xanaud in order to remain in St Louis

In the Chapter 6 Opening Case, GE achieved growth and diversification through mergers and acquisitions. a. True b. False

True

Restructuring strategies are commonly used to correct or deal with the results of ineffective mergers and acquisitions

True

Which of the following is true of walmart? a. Walmart has unusual amount of flexibility for a large firm b. Walmart's success is largely due to the fact it has little market commonality with other industry firms c. Decision-making responsibility is centered at its Arkansas headquarters, which allows the firm to respond quickly to competitive attacks d. Walmart's advantage lies in its ability to "think big"

Walmart has an unusual amount of flexibility for a large firm

An office management firm has developed a system for efficiently organizing small medical and dental practices both through proprietary software and through unique training programs for staff. It has recently acquired a firm specializing in providing management services for veterinary practices. The office management firm is hoping to a. achieve economies of scope. b. implement vertical integration. c. achieve financial economies through an unrelated acquisition. d. acquire specialized talent from the veterinary management company.

achieve economies of scope

A primary reason for a firm to pursue an acquisition is to a. avoid increased govt. regulation b. achieve greater market power c. exit a hyper-competitive market d. achieve greater financial returns in the short run

achieve greater market power

Without effective due diligence the a. acquiring firm is likely to overpay for an acquisition. b. firm may miss its opportunity to buy a well-matched company. c. acquisition may deteriorate into a hostile takeover, reducing the value creating potential of the action. d. firm may be unable to act quickly and decisively in purchasing the target firm.

acquiring firm is likely to overpay for an acquisition

A(n) __ occurs when one firm buys a controlling, or 100 percent interest, in another firm merger acquisition spin-off restructuring

acquisition

A manager in your company is proposing the acquisition of Taylor Company, which has developed a new, innovative product instead of a strategy of developing new products in-house. All of the following arguments are correct EXCEPT a. acquisition of Taylor should be primarily for defensive rather than strategic reason b. research suggests that acquisition strategies are a common means of avoiding risky internal ventures c. outcomes of acquisitions can be estimated more easily and accurately than outcomes for an internal product development process d. acquisitions could become a substitute for innovation with your firm

acquisition of Taylor should be primarily for defensive rather than strategic reasons

SpeakEasy, a U.S. software company that specializes in voice-recognition software, wishes to rapidly enter the growing technical translation software market. This market is dominated by firms making highly differentiated products. To enter this market, SpeakEasy would be best served if it considers a(an) a. vertical acquisition of a firm that uses technical translation products. b. acquisition of a highly related firm in the technical translation market. c. cross-border merger, preferably with an Indian or Chinese company. d. strategy of internally developing the technical translation products needed to compete in this market.

acquisition of a highly related firm in the technical translation market

The term "leverage" in leveraged buyouts refers to the a. firm's increased concentration on the firm's core competencies. b. amount of new debt incurred in buying the firm. c. fact that the employees are purchasing the firm for which they work. d. process of removing the firm's stock from public trading.

amount of new debt incurred buying the firm

Research has shown that horizontal acquisitions: a. tend to have disappointing financial results in the long run b. are being replaced by virtual acquisitions c. result in lower levels of performance than unrelated acquisitions d. are able to use activity sharing to successfully create economies of scope

are able to use activity sharing to successfully create economies of scope

Horizontal, vertical, and related acquisitions to build market power a. are likely to undergo regulatory review and analysis by financial markets b. are rarely permitted to occur across international borders c. typically involve a firm purchasing one of its suppliers or distributors d. concentrate on capturing value at more than one stage in the value chain

are likely to undergo regulatory review and analysis by financial markets

Rapid-Built Homes specializes in low-cost prefabricated, modular homes that can be erected in a matter of days anywhere in the country. Rapid-Built focuses on entire subdivisions of homes developed by real estate speculators. ModernModular Homes (ModMod) specializes in modular homes designed by architects, which can be built anywhere in the country. The buyers usually build the home themselves from kits on their own lots. ModMod sells fewer than 100 house kits per year. ModMod is run by two professors of architecture as a sideline business. According to the "Framework of Competitive Analysis," we can say that Rapid-Built and ModMod a. are directly mutually acknowledged competitors b. have high resource similarity c. have high market commonality d. are probably not engaged in intense competitive rivalry

are probably not engaged in intense competitive rivalry

Certain regulatory changes (such as antitrust regulation and tax laws) create incentives or disincentives for diversification that: create value reduce value are value-neutral are managerial motives to diversify

are value-neutral

A firm is likely to respond to an attack by a competitor in all of the following situations EXCEPT when: a. attack is by a price predator b. attack makes firm's market position less defensible c. attack damages the firm's ability to use its capabilities d. attack improves competitor's market position

attack is by a price predator

A second mover a. is typically ineffective in its response to the first mover. b. attempts to provide a product with greater customer value than the first mover's product. c. usually incurs higher expenses than the first mover since it must engage in reverse engineering. d. typically has a higher survival rate than first movers which typically take greater risks.

attempt to provide a product with greater customer value than first mover's product

Speciality Steel, Inc needs a particular type of brick to line its kilns to achieve high temperatures need for the steel. The clay to make this brick is very rare and only two brick plants in the US make it. Speciality steel is buying one, this is... a. backward integration b. forward integration c. horiztonal integration d. vertical integration

backward integration

When managers become overly focused on making acquisitions, it is a. because the skills of top executives are better used in making acquisitions than they are in daily organization operations. b. because of the thrill of selecting, chasing, and seizing a target. c. due to pressure from major stakeholders to diversify the firm. d. because acquisitions are a quick way to improve the financial standing of the firm

because of the thrill of selecting, chasing, and seizing a target

Large diversified businesses often face what is known as the "conglomerate discount." This discount means that investors a. understand that the financial efficiencies of this strategy automatically make these stocks worth more than their current market valuation. b. believe that the value of conglomerates is less than the value of the sum of their parts. c. increase the expected future earnings of conglomerates. d. have found that over time, conglomerates earn more than the component companies would have earned independently.

believe that the value of conglomerates is less than the value of the sum of their parts

The CEO of the wholesome food grocery retail chain, which specializes in organic meat and produce, has stated "key to success is to find your niche and focus on it, regardless of what anyone else does" The CEO a. realizes he must understand competitors in order to predict competitive actions/responses b. understands he is the market leader in the niche and has sustainable competitive advantage c. believes he has placed his firm in a slow-cycle industry where concerns about protecting unique competencies dominate concerns about market share d. realizes his firm has such lower resources than other competitor that his chain is "invisible"

believes he has placed his firm in a slow-cycle industry where concerns about protecting unique competencies dominate concerns about market share

When a firm is overly dependent on one or more products or markets, and the intensity of rivalry in that market is intense, the firm may wish to ____ by making an acquisition. a. increase new product speed to market b. brown its competitive scope c. increase its economies of scale d. overcome entry barriers

brown its competitive scope

Thomas is an upper-middle level manager for a firm that has been actively involved in acquisitions over the last 10 years. The firm has grown much larger as a result. Thomas has been dismayed to find that recently the managerial culture of the firm has been turning more and more to ______ controls. a. bureaucratic b. strategic c. tactical d. organic

bureaucratic

Competitive rivalry has the most effect on the firm's _____ strategies than the firm's other strategies business level corporate level acquisition international

business level

The ultimate test of the value of a corporate-level strategy is whether the a. corporation earns a great deal of money. b. top management team is satisfied with the corporation's performance. c. businesses in the portfolio are worth more under the management of the company in question than they would be under any other ownership. d. businesses in the portfolio increase the firm's financial returns.

businesses in the portfolio are worth more under the management of the company in question than they would be under any other ownership

All competitive advantages do not accrue to large sized firms. A major advantage of smaller firms is that they a. are more likely to have organizational slack. b. can launch competitive actions more quickly. c. have more loyal and diverse workforces. d. can wait for larger firms to make mistakes in introducing innovative products.

can launch competitive actions more quickly

Internal product development is often viewed as a. carrying a high risk of failure. b. the only reliable method of generating new products for the firm. c. a quicker method of product launch than acquisition of another firm. d. critical to the success of biotech and pharmaceutical firms

carrying a high risk failure

Which industry can be least described as a slow-cycle market? freight railroads pharmaceuticals cell phone provider private ownership of highways and bridges

cell phone provider

Among the value-neutral incentives to diversify, some come from the firm's external environment while others are internal to the firm. External incentives to diversify include a. the fact that other firms in an industry are diversifying. b. pressure from stockholders who are demanding that the firm diversify. c. changes in antitrust regulations and tax laws. d. a firm's low performance.

changes in antitrust regulations and tax laws

Which organization has the highest market dependence? a. chain of rapid-service oil change shops b. manufacturer of chemicals for the international pharmaceutical industry c. regional department store having 26 locations in the NW d. company that specializes in making replacement tiles for the space shuttle

company that specializes in making replacement tiles for the space shuttle

Multimarket competition occurs when firms a. sell different products to the same customer. b. have a high level of awareness of their competitors' strategic intent. c. simultaneously enter into an attack strategy. d. compete against each other in several geographic or product markets.

compete against each other in several geographic or product markets

In general, firms are more aware of competitors that have similar resources and that: a. have low market dependence b. are late movers c. have low market commonality d. compete against the firm in multiple markets

compete against the firm in multiple markets

The risk for firms that follow the unrelated diversification strategy in developed economies is that a. external investors tend to dump stocks of conglomerates during economic downturns b. conglomerates are typically owned by one powerful entrepreneur and do not survive retirement c. govt. regulations, especially in Europe, have periodically forced the dissolution of conglomerates d. competitors can imitate financial economies more easily than they imitate economies of scope

competitors can imitate financial economies more easily than they imitate economies of scope

Large diversified businesses often face a _______________which results from analysts not knowing how to value a vast array of large businesses with complex financial reports. a. threat of regulation by the Securities and Exchange Commission b. high CEO turnover c. threat of takeover d. conglomerate discount

conglomerate discount

The more sharing of resources and activities among businesses, the more ____ is the relatedness of the diversification. linked constrained integrated intense

constrained

Firms seek to create value from economies of scope through all of the following EXCEPT a. activity sharing. b. skill transfers. c. transfers of corporate core competencies. d. de-integration.

de-integration

During the recent financial crisis, M&A activity ___ , whereas in 2011, M&A activity ____. a. declined; increased. b. declined; declined. c. increased; increased. d. increased; declined.

declined, increased

Intensified rivalry within an industry results in a. increased hiring across the industry. b. increased total revenues across the industry. c. decreased average profitability across the industry. d. increased entries into the industry.

decreased average profitability across the industry

Firms with few competitive resources are more likely a. to not respond to competitive actions. b. respond quickly to competitive actions. c. delay responding to competitive actions. d. respond to strategic actions, but not to tactical actions.

delay responding to competitive actions

When a firm simultaneously practices operational relatedness and corporate relatedness, a. difficult for investors to observe the value created by the firm b. firm is likely to be overvalued by investors c. firm will suffer from diseconomies of scope that outweigh cost savings generated d. firm is seeking to create value through financial economies

difficult for investors to observe the value created by the firm

The value of the assets of a firm using a diversification strategy to create both operational and corporate relatedness tend to be a. discounted by investors. b. inflated by investors. c. completely ignored by investors. d. highly valued by investors.

discounted by investors

Multipoint competition occurs when a. firms have multiple retail outlets. b. firms have multiple products in their primary industry. c. diversified firms compete against each other in several markets. d. firms have diversified portfolios of companies.

diversified firms compete against each other in several markets

As the threat of corporate failure increases due to relatedness between a firm's business units, firms may decide to a. increase the firm's level of retained resources. b. diversify into less risky environments. c. reduce the level of diversity in its investments. d. pursue unproven product lines.

diversify into less risky environments

Revenues for United Parcel Service (UPS) are derived from the following business segments: 60 percent from U.S. package delivery operations, 22 percent from international package delivery, and 18 percent from non-packaging operations. The best description of the corporate level strategy of UPS is unrelated diversification. single business dominant business related constrained related linked

dominant business

Compared with downsizing, __ has a more positive effect on firm performance reconfiguring downscoping leveraged buyouts acquisitions

downscoping

________ refers to a divestiture, spin-off, or some other means of eliminating businesses that are unrelated to a firm's core business. a. Downsizing b. Hostile takeovers c. Shakeouts d. Downscoping

downscoping

An investor is analyzing two firms in the same industry. She is looking for long-term performance from her investment. Both firms are basically identical except one firm is involved in substantial downsizing and the other firm is undertaking aggressive downscoping. The investor should invest in the a. downscoping firm because the higher debt load will discipline managers to act in shareholders' best interests. b. downscoping firm because of reduced debt costs and the emphasis on strategic controls derived from focusing on the firm's core businesses. c. downsizing firm because it will be making decisions based on tactical strategies. d. downsizing firm because it is eliminating employees who are essentially "dead weight" and are dragging down the firm's profitability.

downscoping firm because of reduced debt costs and the emphasis on strategic controls derived from focusing on the firm's core businesses.

Failing to ______ appropriately will result in too many employees doing the same work and prevent the new firm from realizing the cost synergies it anticipated. a. downsize b. spin-off c. downscope d. buyout

downsize

__ is often used when the acquiring firm paid too high a premium to acquire target firm management buyout leveraged buyout downscoping downsizing

downsizing

__________ may be necessary because acquisitions create a situation in which the newly formed firm has duplicate organizational functions such as sales, manufacturing, distribution, and human resource management. a. Management buyout b. Leveraged buyout c. Downsizing d. Downscoping

downsizing

Researchers have found that shareholders of acquired firms often a. earn above average returns b. earn below average returns c. earn close to zero as result of acquisition d. not affected by acquisition

earn above-average returns

In making a decision to diversify, managers use value creating reasons or face risk firm will be acquired. Reason for value-creating reason to diversify? a. economies of scope b. desire for increased compensation c. reduced managerial risk d. low performance

economies of scope

Firms that have selected a related diversification corporate-level strategy seek to exploit a. control shared among business-unit managers b. economies of scope between business units c. favorable demand of buyers d. market power

economies of scope between business units

Which of the following is the most strategic action by Walmart? a. aggressively pricing to ensure they are a price leader b. aggressively pricing toys and electronics during the holiday season c. aggressively pricing school-related items in the back-to-school season d. entering a new foreign market

entering a new foreign market

Which of the following is an example of a strategic action? a. "two movies for price of one" at Blockbuster b. use of product coupons by local grocer c. entry into the European market by Home Depot d. Fare increase by southwest airlines

entry into the european market by home depot

Evidence suggests that firms using acquisitions as a substitute for internally developed innovations a. are able to offset the loss of R&D competencies in other areas b. extend their time-to-market for new product launches c. eventually encounter performance problems d. can leverage their core competencies across broader range of products

eventually encounter performance problems

Problems associated with acquisitions include all except a. managers overly focused on acquisitions b. integration difficulties c. large or extraordinary debt d. excessive time spent on due diligence process

excessive time spent on due diligence process

Which of the following is a value-reducing reason for diversification? a. enhancing the strategic competitiveness of the entire company b. expanding the business portfolio in order to diversify managerial employment risk c. gaining market power relative to competitors d. conforming to antitrust regulation

expanding the business portfolio in order to diversify managerial employment risk

A friendly acquisition a. raises the price that has to be paid for a firm. b. enhances the complementarity of the two firms' assets. c. facilitates the integration of the acquired and acquiring firms. d. allows joint ventures to be developed.

facilitates the integration of the acquired and acquiring firms

"Competitive dynamics" indicates that firms and their strategic actions are independent

false

A firm uses a corporate-level diversification strategy for a variety of reasons all of which have to do with ways to create value.

false

A firm with a reputation as a price predator (an actor that frequently reduces prices to gain or maintain market share) generates few responses to its pricing tactical actions.

false

A major advantage of diversification is that overall monitoring costs are reduced, since each separate business comes under the control of corporate headquarters

false

A merger is defined as a strategy in which one firm purchases controlling interest in another firm. a. True b. False

false

A related acquisition involves two firms in the same industry

false

A tactical competitive action involves a significant commitment of specific and distinctive organizational resources.

false

All of Krispy Kreme's revenues come from its one main product, doughnuts. It can be considered a classic example of a firm following a related constrained strategy.

false

An acquisition of a firm in a highly related industry is referred to as a horizontal acquisition

false

An advantage of using horizontal, vertical, or related acquisitions is that they are not subject to regulatory review

false

As noted in the chapter 7 strategic focus, the current changes cross-border strategy is to focus on buying global brands, sales networks, and goodwill in branded products

false

Bayou belle water uses water drawn only from a single artesian well in south louisiana it has loyal following, since they market the water coca cola and pepsi have high resource similarity

false

Boeing's decision to commit the resources required to build the super-efficient 787 midsized jetliner is an example of a tactical action.

false

Citigroup's acquisition strategy (Chapter 7 Strategic Focus) was effective in that it created a firm that was not overdiversified or too large, and that was able to realize synergies between its units. a. True b. False

false

Citigroup's acquisitions and mergers were driven by the concept of a "financial supermarket" (Chapter 7 Strategic Focus) and was a success since very little or restructuring was later required. a. True b. False

false

Companies creating financial economies through restructuring typically focus on high-technology businesses primarily because these firms are human-resource dependent.

false

Competitive rivalry is the contest to be the first mover in an international market

false

Contract manufacturers who manage their customers' entire product line, and offer services ranging from inventory management to delivery and after-sales services are prime examples of vertical integration

false

Corporate tax laws, rather than tax laws affecting individuals, have had the most impact on the firm's use of free cash flows for investment in acquisitions.

false

Corporate-level strategies are strategies a firm uses to diversity its operations from a single business competing in a single market into several product markets, and most commonly, into several businesses

false

Decisions to expand a firm's portfolio of businesses to reduce managerial risk can have a positive effect on the firm's value.

false

Downscoping represents a reduction in the number of a firm's employees and sometimes in the number of its operating units, but it may or may not represent a change in the composition of businesses in the corporation's portfolio. a. True b. False

false

Even if the effects of a competitor's strategic action on the focal firm are significant little response is likely from that firm

false

Evidence suggests that acquisitions usually lead to favorable financial outcomes especially for the acquiring firm

false

Extensive market commonality guarantees intense competition in an industry

false

Firms are likely to imitate the actions of a competitor that is noted for risky, complex, and unpredictable behavior because this is a way to imitate unobservable core competencies.

false

Firms can increase their speed to market for new products by pursuing an internal product development strategy rather than an acquisition strategy

false

Firms seeking to create value through corporate relatedness use the related constrained strategy.

false

Firms with both operational and corporate relatedness are favorites of investment analysts because the transparency and clarity of their financial statements clearly show the value-creation resulting from the combination of multiple businesses.

false

First movers can gain a sustained competitive advantage when they reduce their costs through reverse engineering.

false

GE (discussed in the Chapter 6 Opening Case) is an example of a firm that related the constrained diversification strategy (different businesses that are highly related)

false

GE (discussed in the Chapter 6 Opening Case) is an example of a firm that used its corporate strategy to achieve competitive advantage by selecting and managing a group of different businesses competing in different product markets

false

Google increasing use of a vertical integration strategy is in line with the extensive use of that strategy by many manufacturing firms. a. True b. False

false

Horizontal acquisitions and related acquisitions tend to contribute less to a firm's competitiveness than do unrelated acquisitions. a. True b. False

false

Hostile acquisitions provide greater financial returns to the acquiring company as it is easier for managers to integrate the firms. a. True b. False

false

It is relatively common for a firm to develop new products internally to diversity its product lines

false

Junk bonds are now used more frequently to finance acquisitions primarily because of the belief that debt disciplines managers

false

Large or extraordinary debt is defined as overpaying for an acquired firm. a. True b. False

false

One advantage of an unrelated diversification in a developed economy is that competitors cannot easily imitate the financial economies, whereas they can easily replicate the value gained through the use of a related diversification strategy.

false

Performance continues to increase as diversification increases from single business to unrelated diversification

false

Private synergies exist between a potential acquisition target and all firms seeking to acquire it. a. True b. False

false

Quality begins at the bottom of the organization where employees must create values for quality that permeate the entire organization.

false

Related linked firms share more resources and assets between their businesses than do related constrained firms

false

Research evidence suggests that horizontal acquisitions of firms with dissimilar characteristics result in higher performance levels

false

Research has shown that the more different the acquired firm is in terms of competencies and resources than the acquiring firm, the more likely the acquisition is to be successful

false

Revenues for United Parcel Service (UPS) come from the following business segments: 60 percent from U.S. package delivery operations, 22 percent from international package delivery, and 18 percent from non-packaging operations. The best description of the corporate level strategy of UPS is unrelated diversification

false

Since the 1950s, U.S. government policy regarding antitrust concerns has remained constant.

false

Successful product diversification is expected to increase the variability in the firm's profitability since the earnings are generated from several different business units

false

The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a(n) horizontal acquisition.

false

The intent of the owners in a whole-firm leveraged buyout may be to increase the efficiency of the bought-out firm and resell it in 5-8 years. This tends to make the managers of the buyout risk takers since they will not survive resale, have little ot lose

false

The lower the barriers to entry, the more likely firms will use acquisition as a means to enter a market. a. True b. False

false

The need for quality products and services is so high that quality alone can assure a firm that it will achieve strategic competitiveness and earn above-average returns.

false

The outcome of downsizing, downscoping, and leveraged buyouts is higher performance. a. True b. False

false

The post-acquisition integration phase is less important for acquisition success than characteristics of the deal itself

false

The relatively strong U.S. dollar has increased the interest of firms from other nations to acquire US companies

false

The use of poison pills increases the chance that a poorly performing firm will be taken over.

false

Top managers typically become overly focused on acquisitions because only they can perform most of the tasks involved, such as performing due diligence on the target firm. a. True b. False

false

Two firms, such as a small local, family-owned Italian restaurant and Olive Garden share few markets and have little similarity in resources, but are nonetheless direct and mutually acknowledged competitors.

false

Under the framework of competitive action and response, "ability" refers to an attacking or responding firm's knowledge of the competitive market characteristics.

false

United Technologies Corp. (UTC) uses acquisitions of firms such as Otis Elevator Company (elevators, escalators, and moving walkways) and Carrier Corporation (heating and air conditioning systems) as the foundation for implementing its related diversification strategy. a. True b. False

false

Unlike fast-cycle markets, the struggle for market share in standard-cycle markets is moderate.

false

Unrelated diversified firms become overdiversified with a smaller number of business units than do firms using an unrelated diversification strategy

false

Walmart has recently opened a store in Alsatia, Missouri. Several local small retailers have decided that choosing not to respond to Walmart's competitive actions is a viable long-term option, because although the companies have high market commonality they have little resource similarity. These small retailers are correct in their decision. a. True b. False

false

Walmart's aggressive pricing strategy is a strategic action that plays a major role in how it competes.

false

Wilberforce Press is a small book publishing firm in Iowa that has been owned by the same family since 1895. It is being purchased by Ozarka Publishing, another family-run business in Nebraska, which has been a specialty publisher for 77 years. Each company is known for its unique culture passed down from its founders. Executives and employees in both firms have "grown up" with their companies. Since both these companies have a long, stable history in highly related industries, this acquisition has a high probability of success. a. True b. False

false

Without strict governance mechanisms, the majority of executives will act in their own self-interest rather than acting as positive stewards of firm resources.

false

Which pair of firms has the LEAST resource similarity? small family owned Italian restaurant; olive garden target; walmart hp; dell fedex; ups

family italian and olive garden

A company in a ____ industry is LEAST likely to make heavy use of patents and copyrights. slow cycle medium cycle standard cycle fast cycle

fast cycle

An organization's loyalty to its own product is a competitive disadvantage in a __ market slow cycle standard cycle intermediate cycle fast cycle

fast cycle

____ markets are often described as volatile and innovative. slow cycle fast cycle standard cycle sheltered

fast cycle

Reverse engineering is characteristic of first movers fast-cycle markets market leaders price predators

fast-cycle markets

A firm practicing unrelated diversification can make better capital allocations to its subsidiary businesses than the external capital market can for all the following reasons EXCEPT a. corporate headquarters can allocate capital according to more specific criteria than is possible with external market allocations. b. corporate headquarters has more complete information about the subsidiary businesses than the external capital market. c. the firm can acquire other firms with innovative products instead of allocating capital to research and development. d. corporate headquarters can more effectively discipline underperforming management teams through resource allocation than can the external market.

firm can acquire other firms with innovative products instead of allocating capital to research and development

First movers are a. entrepreneurs who lead in the establishment of new industries. b. firms that are first to exit a declining industry. c. firms that take an initial competitive action. d. individuals who move frequently as employment opportunities change in a locale.

firms that take an initial competitive action

Which of the following statements is false? a. first movers tend to take higher risks than second and late movers b. first movers tend to have significantly higher revenues than second movers c. first movers have lower survival rates than second and late movers d. first movers tend to have more organizational slack than later movers

first movers have lower survival rates than second and late movers

Successful unrelated diversification through restructuring is typically accomplished by a. focusing on mature, low-technology businesses. b. a "random walk" of good luck in picking firms to buy. c. seeking out high technology firms in high growth industries. d. a top management team that is not constrained by pre-established ideas of how the firm's portfolio should be developed.

focusing on mature, low tech businesses

______ typically result(s) in the acquiring firm being able to prevent valuable human resources in the acquired firm from leaving. a. Financial slack b. Private synergy c. Friendly acquisitions d. High compensation

friendly acquisitions

During the 1990s top executives of Titanic, Inc., followed a pattern of aggressive acquisitions and diversification. Now, Titanic is performing poorly and earning below average returns. Lusitania, a large conglomerate firm, is in the final stages of purchasing Titanic. Lusitania has announced that it will fire Titanic's current top executives. The Titanic executives may not be worried about their impending job loss if they a. plan to take poison pills. b. have golden parachutes. c. have silver handcuffs. d. have ironclad contracts.

have golden parachutes

The chief disadvantage of being a first mover is the a. high degree of risk. b. high level of competition in the new marketplace. c. inability to earn above-average returns unless the production process is very efficient. d. difficulty of obtaining new customers.

high degree of risk

____ and ____ describe the situation in which organizations are direct competitors and are fully aware of the competition. a. high market commonality; high resource similarity b. high market commonality; low resource similarity c. low market commonality; high resource similarity d. low market commonality; low resource similarity

high market commonality; high resource similarity

Firms with _____ market commonality and _____ resource similarity are direct and mutually acknowledged competitors. low; high low; low high; high high; low

high; high

Isodore Crocker, CEO of Gothan Engines, Carolina Textiles a. successful acquisition will increase CEO power over board b. making an acquisition is easier to increase firm value than improve core competencies c. higher CEO pay is related to larger organization size d. CEOs near retirement seek empire to build legacy

higher CEO pay is related to larger organization size

The curvilinear relationship of corporate performance and diversification indicates that a. dominant-business corporate strategies tend to be higher performing than related constrained or unrelated business strategies. b. the highest performing business strategy is related constrained diversification. c. the less related the businesses acquired, the higher performing the organization. d. none of the strategies consistently outperforms the others.

highest performing business strategy is related constrained diversification

Dragonfly Publishers of children's books has purchased White Rabbit, another publisher of children's books. Both companies' books are sold to the same retail stores and schools. Their content is different, since Dragonfly produces children's literature, whereas White Rabbit focuses on child-level scientific and nature topics. Which of the following statements is probably TRUE about this acquisition? a. This is a horizontal acquisition. b. This is an example of virtual integration. c. Dragonfly is beginning to build a conglomerate. d. Economies of scope are unlikely to result from this acquisition.

horizontal acquisition

The purchasing of firms in the same industry is called: unrelated diversification vertical integration networking the organization horizontal acquisition

horizontal acquisition

The March 2011 announcement that AT&T was acquiring Tmobile USA from deutscje telekom is a __ acquisition and is intended to a. vertical; increase diversification b. horizontal; increase market power c. vertical; overcome entry barriers d. related; increase speed to market

horizontal; increase market power

What is the similarity between high tech and service based firms that makes them risky as restructuring candidates? a. human-resource dependent b. few tangible assets c. both types of firm rely on financial economies d. demand for their products is highly sensitive to economic downturns

human-resource dependent

Cross-border acquisitions are critical to U.S. firms competing internationally a. if they are to develop differentiated products for markets served. b. when market share growth is the focus. c. where consolidated operations are beneficial. d. if they wish to overcome entry barriers to international markets.

if they wish to overcome entry barriers to international markets

Which of the following is NOT a limitation directly relating to vertical integration? a. bureaucratic costs b. loss of flexibility through investment in specific technologies c. capacity balance and coordination problems from changes in demand d. imitation of core technology by potential competitors

imitation of core technology by potential competitors

A company pursuing vertical integration can gain market power over its competitors through all of the following EXCEPT a. improved adjustment to technological changes. b. savings on operations costs. c. improved product quality. d. avoidance of market costs.

improved adjustment to technological changes

Managerial motives to seek diversification include a desire to a. improve their marketability to other firms. b. effectively use corporate resources. c. provide higher returns to corporate stakeholders. d. increase their compensation.

increase compensation

The use of high levels of debt in acquisitions has contributed to a. the increase in above-average returns earned by acquiring firms. b. an increased risk of bankruptcy for acquiring firms. c. the confidence of the stock market in firms issuing junk bonds. d. an increase in investments that have long-term payoffs.

increased bankruptcy for acquiring firms

Whole-firm LBOs tend to result in all the following negative outcomes EXCEPT a. large debt and increased financial risk. b. failure to invest in R&D. c. risk-averse management. d. inefficient operations

inefficient operations

Quality affects competitive rivalry because a competitor whose products suffer from poor quality likely will _____________ until ___________. a. initiate more competitive actions; firm returns to profitability b. initiate fewer competitive actions; quality problems are corrected c. initiate more competitive actions; quality problems are corrected d. advertise more; customers believe quality has improved

initiate fewer competitive actions; quality problems are corrected

Entering new markets through acquisitions of companies with new products is not risk-free, especially if acquisition becomes a substitute for market discipline innovation risk analysis international diversification

innovation

Which of the following is NOT an attribute of a successful acquisition? a. acquired firm has large financial slack b. acquired and acquiring firms have complementary assets/resources c. Innovation and R&D investments continue as part of firm's strategy d. Investments in advertising and image building are made quickly

investments in advertising and image building are quickly made

Private synergy a. occurs in most related acquisitions and allows firms to see increased returns. b. is frequently achieved in conglomerates. c. is not easy for competitors to understand and imitate. d. is assessed by managers during the due diligence process

is not easy to understand and imitate

GE (Chapter 6 Opening Case) is unusual in that it a. is widely diversified but competes only in manufacturing industries. b. has had an unblemished environmental record. c. is one of the few large diversified large firms that have been successful over time. d. restricted its investments to only developed economies.

is one of the few large diversified firms that have been successful over time

According to the Chapter 7 strategic focus, China's recent approach to acquisition has been to focus on hard assets instead of established branded products because a. China's initial acquisition activities in branded products was highly successful and it wanted to apply those successful techniques to hard assets that would create more value b. hard assets around the world had appreciated rapidly and China wanted to take advantage of that appreciation c. China's currency had depreciated relative to currencies in developed countries making acquisition of hard assets in those countries cheaper d. it did not always have managerial capability to realize successful performance of branded products

it did not always have the managerial capability to realize successful performance of branded products

The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because a. of barriers to entry in many industries. b. it is difficult and time intensive for companies to develop products that differ from their current product line. c. innovation in both the acquired and the acquiring firm is enhanced by the exchange of competencies resulting from acquisition. d. unrelated acquisitions are usually uncomplicated because the acquired firm is allowed to continue to function independently as it did before acquisition.

it is difficult and time intensive for companies to develop products that differ from their current product line

_______ are unsecured obligations that are not tied to specific assets for collateral. a. Bearer bonds b. No-load stocks c. Penny stocks d. Junk bonds

junk bonds

Because of the tax laws of the 1960s and 1970s, when dividends were taxed more heavily than capital gains, shareholders preferred that corporations a. pay dividends annually. b. keep free cash flows for investment in acquisitions. c. distribute capital gains regularly. d. increase managerial salaries.

keep free cash flows for investment in acquisitions

Without quality, the firm's products a. can compete effectively on the basis of low price. b. lack credibility among customers. c. must be exported to developing countries, because they are not competitive in the United States or developed countries. d. are associated with predatory competition.

lack credibility among customers

Caterpillar's payment of a 32 percent premium for the acquisition of Bucyrus in 2011 and subsequent need to issue more stock illustrates the acquisition problem of a. integration difficulties. b. inability to achieve synergy. c. large or extraordinary debt. d. managers overly focused on acquisitions

large or extraordinary debt

A firm that is LEAST likely to launch competitive actions is one that has: a. organizational slack b. advanced r & d c. recently improved the quality of its products d. large size

large size

In general, compared with firms which compete in only one market, among firms which face one another in multiple markets there is a. similar competitive rivalry. b. less competitive rivalry. c. more competitive rivalry. d. no competitive rivalry.

less competitive rivalry

Research suggests that a firm with greater multi market contact is ___ likely to initiate and attack, and __ likely to respond aggressively when attacked more; more less; more less; less more; less

less; more

Due diligence includes all of the following activities EXCEPT assessing a. differences in firm cultures. b. tax consequences of the acquisition. c. the level of private synergy between the two firms. d. financing for intended transaction.

level of private synergy between two firms

The main difference between the related constrained level of diversification and the related linked level of diversification is a. % of total organizational profitability that comes from dominant business b. level of resources and activities shared among the businesses c. whether the diversification is vertical or horizontal d. whether the diversification is value creating or value neutral

level of resources and activities shared among the businesses

Free cash flows are a. liquid financial assets for which investments in current businesses are no longer economically viable. b. liquid financial assets that for tax purposes must be reinvested in the firm if not distributed as dividends to shareholders. c. the profits resulting after a restructured firm has been sold. d. dividends that have been distributed to shareholders that are taxed as capital gains.

liquid financial assets for which investments in current businesses are no longer economically viable

The downside of synergy in a diversified firm is a. increasing independence of businesses. b. the reduction of activity sharing. c. excessive focus on risky innovation. d. the loss of flexibility.

loss of flexibility

Akamai Technologies is a dominant player in the content delivery network (CDN) market. Akamai is not very diversified (i.e., is dependent on the CDN market). If rival CDN providers such as Limelight Networks and Level 3 Communications lower their basic CDN service prices, what would be Akamai's likely response? a. raise its prices b. do nothing since it is the market leader c. exit the industry d. lower its prices

lower its prices

All of the following statements are correct except a. immediately after the announcement of a planned acquisition, stock price of majority of acquiring firms declines b. shareholders of acquired firms often earn above-average returns from and acquisition c. majority of acquisitions increase long-term value for acquiring firm d. shareholders of acquiring firms typically earn returns from the transaction that are close to zero

majority of acquisitions increase long-term value for acquiring firm

The drawbacks to transferring competencies by moving key people into new management positions include all EXCEPT a. people involved may not want to move b. managerial competencies are not easily transferable to different organizational cultures c. managers with these skills are not expensive d. top-level managers may resist having these key people transferred

managerial competencies are not easily transferable to different organizational cultures

Which of the following is not a result of over-diversification? a. executives do not have rich understanding of all firm's business units b. mangers emphasize strategic controls rather than financial controls c. firms use acquisition as a substitute for innovation d. managers become short-term in their orientation

managers emphasize strategic controls rather than financial controls

Transaction costs include all of the following except a. charges from investment bankers who compete due diligence for acquiring firm b. loss of key employees following acquisition c. managers' time spent evaluating target firms d. managers' time spent planning diversification strategy of firm

managers' time spent planning diversification strategy of firm

Both ____ and ____ affect the awareness and motivation of a firm to undertake actions and responses. a. first mover advantage; corporate size b. market commonality; resource similarity c. management capabilities; competitive analysis d. speed of management decisions; management actions

market commonality; resource similarity

Competitors are more likely to respond to competitive actions that are taken by a. differentiators. b. larger companies. c. first movers. d. market leaders.

market leaders

The Mars acquisition of the Wrigley assets was part of its unrelated constrained diversification and added market share to the Mars/ Wrigley integrated firm. It called Mars to gain __ because it could sell its products above the market level or reduce its costs below the market level a. multipoint competition b. virtual integration c. market power d. vertical integration

market power

Quality is a. meeting or exceeding customer expectations in the goods and/or services offered. b. only a major factor in the production of luxury goods, such as BMW cars. c. an assured way to gain competitive advantage. d. a viable trade-off with product cost in gaining a competitive advantage.

meeting or exceeding customer expectations in the goods and/or services offered

Compared to internal product development, acquisitions allow a. immediate access to innovations in mature product markets. b. more accurate prediction of return on investment. c. slower market entry. d. more effective use of company core competencies

more accurate prediction of return on investment

Compared with diversification based on intangible resources, diversification based on financial resources is a. less imitable, less likely value long term b. more imitable, less likely value long term c. less imitable, more likely value long term d. more imitable, more likely value long term

more imitable, less long term value

The presence of barriers to entry in a particular market will generally make acquisitions ____ as an entry strategy. less likely more likely prohibitive illegal

more likely

The more "constrained" the relatedness of diversification, a. the fewer the linkages between the businesses within the portfolio owned by the firm b. wider the variation in the portfolio of businesses owned by the firm c. the more links there are among the businesses owned by an organization d. lower the proportion of total organizational revenue derived from the dominant business

more links there are among the businesses owned by an organization

____ relates to the gains or losses a firm will experience if it attacks a rival or responds to an attack by a rival. motivation awareness responsiveness ability

motivation

All of the following were results of Citigroup's acquisition strategy EXCEPT a. overly diversified b. much smaller, through global, business financial service firm c. too large d. lacking in synergy

much smaller, through global, business financial service firm

When diversification results in two companies, such as UPS and FedEx, simultaneously competing in the same product areas or geographic markets, this is called ____ competition. multiple multiportal multipoint multiplicit

multipoint

According to the chapter 7 opening case, the difference between Facebook's acquisition approach and the approaches of Microsoft and Google is that a. FB tends to acquire earlier-stage companies, whereas Microsoft and Google tend to acquire later-stage companies b. none of FB's acquisitions have survived as independent companies, whereas those of Microsoft and Google have continued to operate as subsidiaries c. FB's approach is to acquire earlier-stage companies, whereas Microsoft and Google tend to acquire later-stage companies d. Microsoft's and Google's acquisitions have all been friendly, whereas FB's have all been hostile

none of FB's acquisitions have survived as independent companies, whereas Microsoft and Google have continued to act as subsidiaries

There are few true mergers because a. few firms have complementary resources. b. integration problems are more severe than in outright acquisitions. c. one firm usually dominates in terms of market share, size, or value of assets. d. of managerial resistance. True mergers result in significant managerial-level layoffs.

one firm usually dominates in terms of market share, size or value of assets

A noted professional art academy has founded an "artists and friends" travel company specializing in tours for artists to scenic locales, using its faculty as traveling teachers. In addition, the art academy has purchased a framing company to both make frames for academy art works, but also to sell museum-quality framing services to the public. The art academy is engaging in diversification based on ______ relatedness. a. operational b. corporate c. intellectual d. constrained

operational

Goods or services in standard-cycle markets reflect a. organizations that serve a mass market b. numerous first mover advantages c. inability to sustain a competitive advantage except for brief periods of time d. competitive advantages that are shielded from imitation

organizations that serve a mass market

Cross-border acquisitions are primarily made to a. reshape the firm's competitive scope. b. reduce the cost of new product development. c. take advantage of higher education levels of labor in developed countries. d. overcome barriers to entry in another country.

overcome barriers to entry in another country

According to the Chapter 7 Strategic Focus, research suggests that emerging market firms tend to __ than other firms and that govt. ownership of those firms leads to __ for the acquisition a. pay higher premium; overpayment b. pay lower premium; over payment c. pay lower premium; underpayment d. pay higher premium; underpayment

pay higher premium; overpayment

Each of the following is a rationale for acquisitions except a. achieving greater market power b. overcoming significant barriers to entry c. increasing speed of market entry d. positioning the firm for tactical competitive move

positioning the firm for a tactical competitive move

The __ phase is probably the single most important determinant of shareholder value creation in mergers and acquisitions a. pre-acquisiton negotiations b. pre-acqusition due diligence c. post-acquisition integration d. post-acquisition restructuring

post-acqusition integration

Companies in fast-cycle markets need to profit quickly from an innovative product for all of the following reasons EXCEPT: a. technology used is not proprietary b. prices of component parts tends to rise rapidly c. product prices fall quickly in fast-cycle markets d. counterattacks from rivals come quickly

prices of component parts tend to rise rapidly

Which of the following statements is false? a. synergy resulting from acquisition generates gain in shareholder wealth beyond what they could achieve through diversification of own portfolio b. private synergy results when combination of two firms yields competencies and capabilities that could not be achieve by combining with any other firm c. private synergy is easy for competitors to understand and imitate d. private synergy is more likely when the two firms in an acquisition have complementary assets

private synergy is easy for competitors to understand and imitate

Backward integration occurs when a company produces its own inputs owns its own source of distribution of outputs is concentrated in a single industry is divesting unrelated business

produces its own inputs

Walt Disney's focus on ____ is typical of a slow-cycle market. innovation total quality proprietary rights economies of scale

proprietary rights

In order to compete effectively, standard-cycle firms need all of the following EXCEPT large market share customer loyalty through brand name careful control of operations to preserve consistency for customers rapid and continuous product introductions

rapid and continuous product introductions

Which of the following is nOT one of the three main restructuring strategies realigning downsizing downscoping leveraged buyouts

realigning

Which of the following reasons for diversification is most likely to increase the firms value? a. increasing managerial compensation b. reducing costs through business restructuring c. taking advantage of changes in tax laws d. conforming to antitrust regulation

reducing costs through business restructuring

Acquisitions to increase market power require that the firm have a(n) ______ diversification strategy. a. unrelated b. related c. dominant-business d. single-business

related

A firm that earns less than 70 percent of revenue from its dominant business and has direct connections between its businesses is engaging in ____ diversification. unrelated related constrained related linked dominant

related constrained

The Publicis Groupe has three major groups of business (advertising, media, and digital) that share resources and capabilities. Publicis Groupe is using a diversification strategy. a. related linked b. related constrained c. unrelated d. dominant

related constrained

The Publicis Groupe uses the digital technology from its digital business to enhance the advertising products in its advertising group. This sharing of activities is characteristic of the _____________ diversification strategy. related constrained related linked unrelated dominant

related constrained

Which of the following is TRUE a. conglomerates no longer exist in US business, but are common in emerging markets b. unrelated diversified firms seek to create value through economies of scope c. sharing of intangible resources between firms is a type of operational sharing in related diversifications d. related constrained firms share more tangible resources and activities between businesses than do related linked firms

related constrained firms share more tangible resources and activities between businesses than do related linked firms

Proctor & Gamble (P&G) has a paper towel and baby diaper business. the firm's paper production plant produces inputs for both businesses. P&G most likely uses the __ diversification strategy to create __ a. related constrained; operational relatedness b. related linked; corporate relatedness c. related constrained; corporate relatedness d. related linked; operational relatedness

related constrained; operational relatedness

The Cherrywood Fine Furniture Company finds itself with excess capacity in its plant and equipment for furniture manufacturing. This excess capacity will be useful in a. unrelated diversification. b. related diversification projects. c. corporate restructuring. d. multipoint competition

related diversification projects

GE (Chapter 6 Opening Case) was diversified and manages businesses that have only a few links between them. This corporate-level strategy is best described as ______ diversification. a. related constrained b. related linked c. unrelated d. conglomerate

related linked

The __ diversification strategy creates value in 2 ways, firm does not have to allocate resources to develop core competence, resource is intangible, hard to imitate a. related constrained b. unrelated c. related linked d. dominant business

related linked

Virgin Group successfully transfers its marketing core competence across airlines, cosmetics, music, drinks, mobile phones, health clubs and a number of other businesses. Virgin follows a ____ diversification corporate strategy. a. dominant business b. related constrained c. related linked d. unrelated

related linked

Although a(n) ________________ firm, GE (discussed in the Chapter 6 Opening Case) has done an exceptional job of _____________________ its four major strategic business units. a. related linked; allocating capitol across b. related constrained; restructuring c. unrelated; sharing activities across d. unrelated; transferring core competencies across

related linked, allocating capital across

Research has shown that the more ___, the greater is the probability that an acquisition will be successful a. related the acquired and acquiring firms are b. diverse the resulting portfolio of competencies c. disparate the corporate cultures d. involved investment banking firms are in the due diligence process

related the acquired and acquiring firms are

Claude holds a large number of shares of Bayou Beauty, a regional brewing company that is considered a likely takeover target by a major international brewer. It would probably be in Claude's financial interest if Bayou Beauty's owners a. resisted selling at any price. b. sold the company to the larger brewer. c. designed a poison pill to discourage a takeover. d. looked for smaller brewers to acquire instead of selling to the larger brewer.

resisted selling at any price

Lobelia's Nursery and Garden Resource Center has long provided high quality, typical types of seasonal bedding plants to customers in the Mobile, Alabama, metropolitan area. It has traditionally competed with the other plant nurseries within a 50-mile radius of Mobile. Recently, Lobelia has opened a branch in Fairfax, Virginia. Lobelia's research shows that most Fairfax nurseries have only one location. Lobelia can expect the local Fairfax nurseries to a. be unmotivated to respond because their market position is not threatened by a new competitor from out-of-town. b. respond with fierce attacks because of resource dissimilarity. c. respond aggressively because of high market dependence. d. take no competitive response because of the lack of mutual interdependence among the nurseries.

respond aggressively because of high market dependence

Late movers are those firms that a. respond to a competitive action a significant amount of time after the first mover's action and the second mover's response. b. respond to a first mover's competitive action often through imitation or a move designed to counter the effects of the action. c. take an initial competitive action (either strategic or tactical). d. typically achieve higher-than-average returns because they can imitate the most efficient actor.

respond to a competitive action a significant amount of time after the first mover's action and second mover's response

Magma, Inc., acquired Vulcan, Inc., 3 years ago. Effective integration of the two companies' culture was never achieved, and the two firms' assets were not complementary. It is very likely that Magma will a. go public through an IPO. b. review the due diligence information collected before the acquisition. c. restructure. d. review its tactical-level strategies

restructure

Typically, in a failed acquisition, the organization will a. restructure. b. go into bankruptcy. c. focus on building private synergy. d. increase integration.

restructure

A leveraged buyout refers to a. firm restructuring itself by selling off unrelated units of company's portfolio b. firm pursuing its core competencies by seeking to build a top management team that comes from similar background c. restructuring action whereby a party buys all assets of a business, financed largely with debt, and takes firm private d. action where management of firm/ external party buy all assets of a business financed largely with equity

restructuring action whereby a party buys all assets of a business, financed largely with debt, and takes firm private

Some research findings have shown that acquisitions typically _____ for shareholders in the acquiring firm. a. result in above-average returns b. provide approximately average returns c. result in returns near zero d. take some time to achieve private synergy, but eventually result in above-average returns

result in returns near zero

After a leveraged buyout, ______ typically occur(s). a. selling of assets b. further rounds of acquisitions c. due diligence d. private synergy

selling of assets

Walt Disney Company has successfully used related diversification to create value by a. sharing activities. b. sharing activities and transferring core competencies. c. transferring core competencies. d. efficient internal capital allocation and restructuring.

sharing activities and transferring core competencies

The basic types of operational economies through which firms seek value from economies of scope are a. synergies between internal and external capital markets. b. the leveraging of individual tangible resources. c. the sharing of value chain activities and support functions. d. joint ventures and outsourcing.

sharing of value chain activities and support functions

Operational Relatedness is created by ___ of __ a. sharing; core competencies b. sharing; activities c. transferring; core competencies d. transferring; activities

sharing; activities

The lowest level of diversification is the ______ level. a. single-business b. dominant business c. related constrained d. unrelated

single business

Market power is derived primarily from the a. core competencies of the firm. b. size of a firm and its resources and capabilities. c. quality of a firm's top management team. d. depth of a firm's strategy.

size of a firm and its resources and capabilities

Sustained competitive advantage is most achievable in a ____ market. slow cycle medium cycle standard cycle fast cycle

slow cycle

Lawsuits over patent and copyright infringements are more common and intense in a. fast-cycle markets because the market is innovation-driven. b. standard-cycle markets because the firm's brand name is such an important competitive advantage. c. slow-cycle markets, because of the ability to shelter the company from imitation of its competitive advantage. d. standard-cycle markets because innovation is rare, and so gives the innovating firm a significant competitive advantage.

slow-cycle markets, because of the ability to shelter the company from imitation of its competitive advantage

Walmart initially used a focused cost-leadership strategy to compete only in small communities by using sophisticated logistics systems and efficient purchasing practices to gain a competitive advantage. The response of local competitors was _______ because they ______. a. rapid; very nimble and flexible b. slow; lacked the ability to marshal resources c. rapid; perceived gains from responding to Walmart's attack d. rapid; had resources and flexibility to compete against Walmart

slow; lacked the ability to marshal resources

The larger the resources of a firm taking a competitive action compared with the resources of the other firms in the industry, the ____ the response will be of these other firms. more fragmented slower larger more tactical

slower

Competition between candy makers where firms package design and ease of availability is a characteristic of slow cycle standard cycle fast cycle intermediate cycle

standard cycle

Consumer goods producers are innovating in terms of healthy products. This type of incremental innovation is typical of fast cycle standard cycle incremental cycle slow cycle

standard cycle

The competitive actions and responses in __ markets are designed to seek large market shares, to gain customer loyalty through brand names, and to carefully control the firm's operations in order to consistently provide same positive experience for customers standard cycle fast cycle slow cycle intermediate cycle

standard cycle

The flat-panel television market where prices have come down and competition has become more stable is best characterized as standard cycle fast cycle slow cycle competitive rivalry

standard cycle

Because Coca-Cola, Nestle, and PepsiCo all sell a product (bottled water) that is essentially the same and all three giant companies are engaged in battles for market share using incremental changes in their products and seeking loyalty to brand names, it is most likely that the bottled water market is a(n) slow cycle standard cycle fast cycle intermediate cycle

standard-cycle

Traditionally, the music industry signed multi-year contracts with artists and sold copyright protected music through established domains, a shift to the digital format and the rise of internet technology has resulted in the sharing of music over peer to peer networks a practice called piracy, in recent years, the music industry has seen rapid decline in CD sales, at the same time, ownership and distribution rights remain clear, attempts at innovation by individual record labels to offer music are quickly copied, based on these factors, the best assessment is that the music industry has shifted from a __ to a __ cycle market slow;fast slow; standard standard;slow standard; fast

standard;fast

A competitive action can be one of two types, either _ or _ a. aggressive; defensive b. quality-based; cost-based c. strategic; tactical d. market-based; resource based

strategic; tactical

Of the value-neutral incentives to diversify, all of the following are internal firm incentives EXCEPT a. overall firm risk reduction b. uncertain future cash flows c. stricter interpretation of antitrust laws d. low performance

stricter interpretation of antitrust laws

Which of the following is not a governance mechanism that may limit managerial tendencies to over-diversify a. market for corporate control b. Board of directors c. surveillance tech d. exec compensation practices

surveillance technologies

Which of the following resources are more likely to create value in diversification process a. plant and equipment b. tacit knowledge c. excess capacity d. financial resources

tacit knowledge

On the whole there are more competitive responses to a. strategic actions than to tactical actions. b. tactical actions than to strategic actions. c. buyer pressures than to supplier pressures. d. the demands of the top management team than to industry structural pressures.

tactical actions than to strategic actions

When the target firm does not solicit the acquiring firm's bid, it is referred to as a(n) a. stealth raid. b. adversarial acquisition. c. takeover or unfriendly acquisition. d. leveraged buyout.

takeover or unfriendly acquisition

An ability to efficiently allocate capital through an internal market may help the firm protect the competitive advantages it develops a. through reduced disclosure to outside parties. b. by the ability to not report losses to investors. c. by the ability to increase pay to managers without shareholders being aware. d. through the ability to reinvest cash in dividends to shareholders.

through reduced disclosure to outside parties

Which of the following firms would be the most likely successful candidate for acquisition and restructuring? medical practice management consulting firm with long term client relationships 1910 tire manufacturer start-up communications tech firm

tire manufacture 1910

Currently, the rationale for making an acquisition includes each of the following EXCEPT a. to increase market power. b. to decrease taxes paid by shareholders. c. to overcome entry barriers. d. to increase diversification.

to decrease taxes paid by shareholders

As noted in the Chapter 6 Opening Case, GE is now a major player in the "clean energy" industry such as wind turbines and solar power. A major reason GE moved in this direction was A) to narrow the focus of its portfolio around energy-related industries. B) to overcome and correct its record in environmental issues. C) to further diversify its portfolio away from services. D) the clean energy industry was guaranteed to be profitable for the next several years.

to overcome and correct its record in environmental issues

Competitive dynamics refers to the a. circumstances in which competitors are aware of degree of mutual interdependence resulting from market commonality and resource similarity b. set of competitive actions / competitive responses the firm takes to build or defend its competitive advantages and to improve its market position c. total set of actions and responses taken by all firms competing within a market d. ongoing set of competitive actions and competitive responses between competitors as they maneuver for advantageous market position

total set of actions / responses taken by all firms competing within a market

The expenses incurred by firms trying to create synergy through acquisition are called __ costs differentiation diversification transaction interaction

transaction

One method of facilitating the transfer of competencies between firms is to a. virtually integrate the two firms. b. transfer key people into new management positions. c. share support activities, such as purchasing practices. d. restructure the weaker firm to mirror the structure of the more successful firm.

transfer key people into new management positions

A company that tries to balance both operational and corporate relatedness and fails risks incurring diseconomies of scope.

true

A firm can predict that a competitor whose products suffer from poor quality is likely to be less aggressive in its competitive actions until those quality problems are corrected.

true

A horizontal acquisition involves two firms in the same industry

true

A major problem with buying other companies in order to gain access to their product lines is that the acquiring firm may lose its own ability to innovate

true

A merger is a strategy through which two firms agree to integrate their operations on a relatively coequal basis. a. True b. False

true

A significant benefit of an internal capital market is limiting competitors' access to information about the performance of the individual businesses within the corporation

true

A significant benefit of an internal capital market is that corporate headquarters has access to detailed and accurate information regarding the performance of the company's portfolio and can thus make better capital allocation decisions

true

A strategy's success is determined not only by the firm's initial competitive actions but also by how well it anticipates competitors' responses to them and by how well the firm anticipates and responds to its competitors initial actions.

true

Acquisitions can become a substitute for innovation in some firms and trigger future rounds of acquisitions. a. True b. False

true

Although Citigroup (Chapter 7 Strategic Focus) is still involved in many financial services sectors, those that will remain after its restructuring will be more solidly focused on its main business, consumer, and investment banking. a. True b. False

true

An acquisition occurs when one firm buys a controlling or 100 percent interest in another firm and the acquired firm becomes a subsidiary business

true

An effective corporate strategy creates aggregate returns across all businesses that exceed what those returns would be without the strategy and contributes to the firm's strategic competitiveness and ability to earn above-average returns

true

An unrelated diversification strategy can create value through two types of financial economies: (1) efficient internal capital allocations, and (2) purchasing other firms, restructuring their assets, and selling them.

true

Antitrust regulation, tax laws, and low performance are all value-neutral reasons why firms engage in diversification.

true

Awareness tends to be greatest when firms have highly similar resources and compete in multiple markets.

true

Carl has just graduated with a management degree. He has a good understanding of his personal strengths and weaknesses and knows he would fit best in a stable organizational environment. In his job search, Carl should target firms in slow-cycle markets.

true

China remains a challenging environment for investors and political and legal obstacles make acquisitions in China risky and difficult. a. True b. False

true

Coca cola and pepsi compete across a number of products and geographic markets indicating both companies have market commonality

true

Companies in emerging markets frequently use the unrelated diversification strategy because of the absence of a "soft infrastructure" in those markets.

true

Compared to diversification that is grounded in intangible resources, diversification based on financial resources only is more visible to competitors and thus more imitable and less likely to create value on a long term basis.

true

Compared with related constrained firms, related linked firms share fewer resources and assets between their businesses, concentrating instead on transferring knowledge and core competencies between the businesses

true

Competitive rivalry is the set of competitive action and responses that occur among firms as they maneuver for an advantageous market position

true

Different incentives to diversify sometimes exist, and the quality of a firm's resources may permit only diversification that is value neutral rather than value creating.

true

Disney is an example of a firm in a slow-cycle market because its animated characters are shielded from imitation by copyrights and trademarks

true

Diversification strategies can be used with both value-creating and value-neutral objectives

true

Downscoping makes management of the firm more effective because it allows the top management team to better understand the remaining businesses. a. True b. False

true

Downsizing may be necessary because acquisitions often create a situation in which the newly formed firm has duplicate organizational functions such as sales, manufacturing, distribution, human resources, and management. a. True b. False

true

Economies of scope are cost savings resulting from a firm successfully leveraging, either through sharing or transferring, some of its capabilities and competencies developed in one business to another business

true

Equator, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same industry in Ireland. It plans to move one of its key managers from its plant in St. Louis to Ireland. This can be considered a method of transferring corporate-level core competencies.

true

Evidence suggests that returns to shareholders of acquired firms are greater than those for acquiring firms

true

Fast-cycle markets are characterized by "generational products," which start out with a substantial technological advance in the performance of a product category followed by incremental technological advances as new generations of products are introduced.

true

Financial economies are cost savings realized through improved allocations of financial resources based on investments inside or outside the firm

true

Firms are more likely to enter a market through acquisition when high product loyalty is present in the industry. a. True b. False

true

Firms often use the downscoping and downsizing strategies simultaneously as did Citigroup in its restructuring

true

Firms operating in the same market, offering similar products, and targeting similar customers are competitors

true

Firms that are typically late movers usually have little organizational slack

true

Firms that sold off related units in which resource sharing was a possible source of economies of scope have been found to produce lower returns than those that sold off businesses unrelated to the firm's core businesses.

true

Firms using a related diversification strategy may gain market power when successfully using their related constrained or related linked strategy.

true

Firms using the related constrained strategy share activities in order to create value.

true

Firms with higher market commonality and highly similar resources are direct and mutually acknowledged competitors

true

GE (discussed in the Chapter 6 Opening Case) is an example of a firm that has used internal capital market allocation as a means of creating value even though it competes using a related linked rather than an unrelated diversification strategy. a. True b. False

true

Golden parachutes protect managers from the negative consequences of over-diversifying a firm

true

Google's diversification could lead the firm toward a related linked strategy and give the firm advantages in multipoint competition with competitors such as Facebook and Microsoft (Chapter 6 Strategic Focus). a. True b. False

true

If managers diversify a firm in a way that does not produce value, the firm risks capital market intervention.

true

If the businesses in the corporate portfolio are not worth more under the management of the corporation than they would be under any other ownership, then the corporate-level strategy has failed.

true

In a diversified firm, capital allocation can be adjusted according to more specific criteria than is possible with external market allocation of capital

true

In a money-making effort, a small private university has decided to institute consulting services using its business faculty as consultants whose services would be sold to clients. This university is attempting to use its faculty to gain economies of scope.

true

In general, strategic actions elicit fewer competitive responses than do tactical actions

true

In spite of the challenges associated with it, a number of firms continue to use the unrelated diversification strategy, especially in Europe and in emerging markets.

true

In the final analysis, firms use merger and acquisition strategies to improve their ability to create value for all stakeholders, including stockholders

true

It can be difficult for investors to actually observe the value created by a firm (Walt Disney) as it shares activities and transfers core competencies

true

Junk bonds are a financing option through which risky acquisitions are financed with debt that provides a large potential return to bondholders

true

Knowing that their firms could be acquired if they are not managed successfully encourages executives to use value-creating diversification strategies

true

Large firms with significant slack resources (i.e., are able to launch a greater number of competitive actions) but who remain flexible and act like small firms (i.e., are able to launch a variety of actions) will be more successful against rivals.

true

Low firm performance is associated with increased diversification.

true

Many manufacturing firms are de-integrating and moving to independent supplier networks

true

Market commonality is concerned with the number of markets the firm and a competitor are jointly involved and the degree of importance of the individual markets to each

true

Market power exists when a firm is able to sell its products above the existing competitive level or decrease the costs of its primary and support activities below the competitive level, or both

true

Mighty Mike's, a manufacturer of power tools for the home hobbyist, has seen its main competitor, MyTools, bring out a line of power tools that are smaller sized, lighter weight, and suitable for women and older hobbyists who have weaker hands than the typical male workshop hobbyist. Mighty Mike is waiting to see whether MyTool's new line is a success. Mighty Mike could be classified as a second mover. a. True b. False

true

Moon-in-June, a designer and manufacturer of wedding dresses, has decided to purchase a retail chain specializing in bridal wear. This purchase will be useful in gaining more market power for Moon-in-June. a. True b. False

true

Most acquisitions that are designed to achieve greater market power entail buying a competitor, a supplier, a distributor, or a business in a highly related industry. a. True b. False

true

One of the most effective ways to test the feasibility of the future merger or acquisition is for the firms to first engage in a strategic alliance

true

One of the potential problems associated with acquisitions is that the additional costs required to manage the large firm will exceed the benefits of economies of scale and additional market power

true

P&G's acquisition of Gillette reshaped its competitive scope by giving P&G a stronger presence in some products for whom men are the target market. a. True b. False

true

Patent laws and regulatory requirements such as required FDA (Food and Drug Administration) approval to launch new products shield pharmaceutical companies' positions in this slow-cycle market.

true

Private synergies are unique to the acquired and acquiring firms and could not be developed by combining either firm's assets with another company. a. True b. False

true

Proctor & gamble (p&g) has a paper towel and baby diaper business that both use paper products. this is an example of value created through the sharing of activities

true

Research evidence shows that increased firm size and greater levels of diversification are correlated with increased executive compensation

true

Research evidence suggests that horizontal acquisitions result in higher performance when the firms have similar strategies, assets, and capabilities

true

Research has shown that maintaining a low or moderate level of firm debt is critical to the success of an acquisition, even when substantial leverage was used to finance the acquisition itself

true

Research shows that in times of high or increasing stock prices, due diligence is relaxed and firms often overpay for acquisitions and the long-run performance of the newly formed firm suffers

true

Research suggests (chapter 7 strategic focus) that government ownership of emerging economy firms leads to overpayment in cross-border acquisitions and that overpayment reduces value for minority shareholders (nongovernment shareholders)

true

Research suggests that a firm with a greater multi market contact is less likely to initiate attack but more likely to response aggressively when attacked

true

Research suggests that emerging economy firms pay a higher premium than other firms when making cross-border acquisitions

true

Restructuring refers to changes in the composition of a firm's set of businesses or its financial structure

true

Synergy exists when the value created by business units working together exceeds the value that those same units create working independently.

true

Synergy is created by the efficiencies derived from economies of scale and economies of scope and by sharing resources across the businesses in the merged firm. a. True b. False

true

Takeovers are unfriendly acquisitions where the target firm does not solicit the acquiring firm's bid. a. True b. False

true

The "conglomerate discount" occurs in large, highly diversified businesses and results from analysts not knowing how to value the vast array of large businesses with complex financial reports

true

The Chapter 7 Strategic Focus shows that the first attempts at cross-border acquisitions by Chinese companies ended in failure. a. True b. False

true

The more dependent a firm is on its market, the more aggressively it will defend it from another competitor.

true

The quickest and easiest way for a firm to diversify its portfolio of businesses is to make acquisitons

true

The reasons why a firm would overpay for a company that it acquires include inadequate due diligence. a. True b. False

true

The recent financial crisis made it difficult for firms to complete "mega deals" and the slowdown in merger and acquisition has continued in 2011

true

The satellite dish at Faye's weekend home has malfunctioned. When she calls to have the dish repaired, the service representative tells her that the dish is obsolete and that parts for it are no longer made. Faye must replace the old dish with a new dish. This is an example of lack of firm loyalty to a product in a fast-cycle market.

true

To be a first mover, the firm must have readily available resources to invest in R&D as well as to rapidly and successfully produce and market a stream of innovative products.

true

Top manager participation in and overseeing the activities required for making acquisitions can divert managerial attention from other matters that are necessary for long-term competitive success. a. True b. False

true

Traditionally, leveraged buyouts were used as a restructuring strategy to correct managerial mistakes or because the firm's managers were making decisions that primarily served their own interests rather than those of the shareholders

true

Transaction costs resulting from an acquisition refer to the direct and indirect costs resulting from the use of acquisition strategies to create synergies

true

Typical returns on acquisitions for acquiring firms are close to zero. a. True b. False

true

United Technologies, Textron, Samsung, and Hutchison Whampoa Limited are examples of diversified firms that have no relationships between their businesses. These firms all use the strategy of unrelated diversification.

true

Vertical integration allows the firm to gain market power as the firm develops the ability to save on its operations, avoid market costs, improve product quality, and possibly protect its technology from rivals

true

Vertical integration exists when a company produces its own inputs (forward integration) or owns its own source of output distribution (backward integration)

true

When a firm becomes highly diversified through acquisitions, managers often focus on financial controls rather than strategic controls. a. True b. False

true

When firms share activities across units, they are often able to achieve increased value.

true

When implementing a restructuring strategy, a company would do best by focusing on mature, low technology businesses rather than high-tech or service businesses

true

When the actual results of an acquisition strategy fall short of the projected results, firms consider using restructuring strategies. a. True b. False

true

an organization with high profitability such as walmart will be able to develop high organizational slack

true

it is more likely that locally owned one-location cafes in a small town will respond more rapidly to tactical actions by each other than they will to strategic actions by burger king

true

two firms such as fed ex and ups that have similar resources and common markets would be direct and mutually acknowledged competitors

true

In a merger a. one firm buys controlling interest in another firm b. two firms agree to integrate their operations on a relatively coequal basis c. two firms combine to create a third separate equity d. one firm breaks into two firms

two firms agree to integrate their operations on a relatively coequal basis

Hutchison Whampoa Limited (HWL) has businesses in ports and related services, telecommunications, property and hotels, retail and manufacturing, and energy and infrastructure. HWL makes no efforts to share activities or transfer core competencies among the businesses. HWL is following a strategy of__________diversification. dominant business related constrained related unlinked unrelated

unrelated

The term "conglomerates" refers to firms using the diversification strategy. a. unrelated b. related constrained c. related linked d. global

unrelated

Which type of diversification is most likely to create value through financial economies? a. related constrained b. operational and corporate relatedness c. unrelated d. related linked

unrelated

Sales of watches among teenagers and 20-somethings are declining rapidly as this age group uses cellphones, iPods, and other devices to tell time. A company that specializes in selling inexpensive watches to this age group may wish to consider ____ in order to develop new products other than watches. a. unrelated diversification. b. backward integration. c. forward integration. d. horizontal acquisitions.

unrelated diversification

Research suggests that __ has decreased while __ has increased due to restricting in 1990s a. forward vertical integration; backward vertical integration b. backward vertical integration; forward vertical integration c. related diversification; unrelated diversification d. unrelated diversification; related diversification

unrelated diversification; related diversification

Which acquisition would be considered the LEAST related? a. a candy manufacturer purchases a chemical laboratory specializing in food flavorings b. a chain of garden centers acquires a landscape architecture firm c. a hospital acquires a long-term care nursing home d. an upscale "white-tablecloth" restaurant chain acquires a travel agency

upscale "white tablecloth" restaurant chain acquires a table agency

One problem with becoming too large is that large firms a. tend to have less market power b. have less potential for economies of scale c. become attractive takeover targets d. increase bureaucratic controls

usually increase bureaucratic controls

Synergy exists when a. cost savings are realized through improved allocations of financial resources based on investments inside or outside the firm. b. two units create value by utilizing market power in their respective industries. c. firms utilize constrained related diversification to build an attractive portfolio of businesses. d. the value created by business units working together exceeds the value the units create when working independently.

value created by business units working together exceeds the value the units create independently

Firms use corporate-level diversification strategies for all the following reasons EXCEPT a. value-creating b. value-neutral c. value-reducing d. value-diversifying

value-diversifying

Baby Doe's, a designer and manufacturer of children's clothing, has decided to purchase a retail chain specializing in children's clothing. This purchase is a(n) a. merger. b. unrelated acquisition. c. horizontal acquisition. d. vertical acquisition.

vertical acquisition

Manny Inc. recently completed the purchase of its primary supplier. Manny intends to begin expanding the market to which the suppliers' products are sold. This purchase is a(n) a. merger. b. unrelated acquisition. c. horizontal acquisition. d. vertical acquisition.

vertical acquisition

The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a(n) a. vertical acquisition. b. unrelated acquisition. c. horizontal acquisition. d. merger of equals.

vertical acquisition

When a firm acquires its supplier, it is engaging in a(n) a. merger. b. unrelated acquisition. c. hostile takeover. d. vertical acquisition.

vertical acquisition

PorkPride Foods produces hams and other meat products. It owns hog raising operations. This is an example of a ____ business. a. de-integrated b. vertically integrated c. totally integrated d. horizontally integrated

vertically integrated

Wm. Wrigley Jr. Company once made only chewing gum. When Wrigley bought Life Savers (a line of candy mints) and Altoids (a line of breath mints) from Kraft, chewing gum then constituted less than 95 percent of revenues. Thus, Wrigley a. was moving away from its traditional single-business strategy toward a dominant strategy. b. was moving away from its traditional dominant strategy toward a related linked strategy. c. became a conglomerate since Life Savers and Altoids are unrelated businesses. d. probably planned to restructure these companies and sell them off.

was moving away from its traditional single business strategy toward a dominant strategy

Corporate level strategy is concerned with __ and how to manage these businesses a. whether the firm should invest in global or domestic businesses b. what product markets and business the firms should be in c. whether the portfolio of businesses should generate immediate above-average returns or should be troubled businesses which will create above-average returns only after restructuring d. whether to integrate backward or forward

what product markets and businesses the firm should be in

The factors that lead to poor long-term performance by acquisitions include all of the following EXCEPT firms a. with insufficient diversification b. having too much debt c. being unable to achieve synergy d. growing too large

with insufficient diversification