CHAPTER 6 (VCOP)

If a multinational firm is unable to understand how the acquired company's assets would fit with their own lines of business, this can lead to A. expansion. B. divestiture. C. cost savings. D. acquisition.

B

Casio, a giant electronic products producer, synthesizes it abilities in miniaturization, microprocessor design, material science, and ultrathin precision castings to produce digital watches. It uses the same skills to produce card calculators, digital cameras, and other small electronics. These collective skills are known as A. core competencies. B. strategic resources. C. shared activities. D. economies of scope.

A

ConAgra, a diversified food producer, increases its power over suppliers by centrally purchasing huge quantities of packaging materials for all of its food divisions. This is an example of using A. related diversification to acquire economies of scope by leveraging pooled negotiating power. B. related diversification to acquire market power by leveraging pooled negotiating power. C. unrelated diversification to acquire financial synergies through portfolio management. D. unrelated diversification to acquire parenting, restructuring, and financial synergies through restructuring and parenting.

A

Corporate-level strategy focuses on A. gaining long-term revenue. B. gaining short-term profits. C. decreasing business locations. D. managing investment bankers and their interests.

A

Creating value within business units can happen when a firm tries to find and acquire either poorly performing firms with unrealized potential or firms in industries on the threshold of significant, positive change. This action is known as A. restructuring. B. leveraging core competencies. C. parenting. D. sharing activities.

A

Creating value within business units can happen when the corporate office helps subsidiaries make wise choices in their own acquisitions, divestures, and new ventures. This is known as A. parenting. B. restructuring. C. leveraging core competencies. D. increasing market power.

A

If a multinational company's motive for the acquisition may have been to enhance executive powers and prestige rather than to improve shareholder return, this can lead to A. divestiture. B. cost savings. C. expansion. D. acquisition.

A

Shaw Industries, a giant carpet manufacturer, increases its control over raw materials by producing much of its own polypropylene fiber, a key input into its manufacturing process. This is an example of A. vertical integration. B. sharing activities. C. pooled negotiating power. D. leveraging core competencies.

A

The downsides or limitations of mergers and acquisitions include all of the following except: A. It is a slow means to enter new markets and acquire skills and competences. B. Difficulties exist in integrating the activities and resources of the acquired firm into on-going operations. C. There can be many cultural issues that can doom an otherwise promising acquisition. D. Premiums that are frequently paid to acquire a business are expensive.

A

Transaction costs include all of the following costs except A. agency costs. B. negotiating costs. C. search costs. D. monitoring costs.

A

When using a BCG matrix, a business that currently holds a large market share in a rapidly growing market and has minimal or negative cash flow would be known as a A. Star. B. Dog. C. Cash Cow. D. Question Mark.

A

3M leverages its competencies in adhesives technologies to many industries, including automotive, construction, and telecommunications. This is an example of using A. related diversification to acquire economies of scope by leveraging pooled negotiating power. B. related diversification to acquire economies of scope by leveraging core competencies. C. unrelated diversification to financial synergies through portfolio management. D. unrelated diversification to parenting, restructuring, and financial synergies through restructuring and parenting.

B

According to the text, corporate restructuring includes A. capital restructuring, asset restructuring, and technology restructuring. B. capital restructuring, asset restructuring, and management restructuring. C. management restructuring, financial restructuring, and procurement restructuring. D. global diversification, capital restructuring, and asset restructuring.

B

An acquisition that results in ______________ indicates that expectations were not met. A. expansion B. divestiture C. cost savings D. increased sales

B

Firms that choose to diversify through internal development must develop _________ that allow them to move __________ from initial opportunity recognition to market introduction. A. strategies; slowly B. capabilities; quickly C. capabilities; slowly D. strategies; quickly

B

If a multinational firm fails to effectively integrate their acquisitions, this can result in A. cost savings. B. divestiture. C. expansion. D. further acquisition.

B

Polaris, a manufacturer of snowmobiles, motorcycles, watercraft, and off-road vehicles, shares manufacturing operations across its businesses. It also has a corporate research and development facility and staff departments that support all of the Polaris operating divisions. This is an example of using A. related diversification to acquire market value by leveraging core competencies. B. related diversification to acquire economies of scope by sharing. C. unrelated diversification to acquire financial synergies through portfolio management. D. related diversification to acquire parenting, restructuring, and financial synergies through corporate restructuring and parenting.

B

Portfolio management frameworks, such as the BCG matrix, share which of the following characteristics? A. Businesses are plotted on a 3-dimensional grid. B. Grid dimensions are based on external environments and internal capabilities-market positions. C. Position in the matrix suggests a need for sharing synergies. D. They are most helpful in helping businesses develop types of competitive advantage.

B

Sharing core competencies is one of the primary potential advantages of diversification. In order for diversification to be most successful, it is important that the A. products use similar distribution channels. B. similarity required for sharing core competencies must be in the value chain. C. target market is the same, even if the products are very different. D. methods of production are the same.

B

The Cisco acquisition of Pure Digital Technologies, the parent of the Flip video camera, failed because A. Cisco had valuable competencies. B. the Flip division of Cisco was slow and less responsive to market pressures. C. consumers continued to purchase the camera. D. Cisco had good vision of the market.

B

The primary means by which a firm can diversify are __________, _________, and ________. A. mergers and acquisitions; differentiation; overall cost leadership B. mergers and acquisitions; joint ventures and strategic alliances; internal development C. joint ventures and strategic alliances; integration of value chain activities; acquiring human capital D. mergers and acquisitions; internal development; differentiation

B

The term golden parachute refers to A. a clause requiring that huge dividend payments be made upon takeover. B. pay given to executives fired because of a takeover. C. financial inducements offered by a threatened firm to stop a hostile suitor from acquiring it. D. managers of a firm in a hostile takeover approaching a third party about making the acquisition.

B

Unbalanced capacities that limit cost savings, difficulties in combining specializations, and reduced flexibility are disadvantages associated with A. strategic alliances. B. vertical integration. C. horizontal integration. D. divestiture.

B

Which of the following statements regarding internal development as a means of diversification is false? A. Many companies use internal development to extend their product or service offers. B. An advantage of internal development is that it is generally faster than other means of diversification and firms can benefit from speed in developing new products and services. C. The firm is able to capture wealth created without having to share the wealth with alliance partners. D. Firms can often develop products or services at a lower cost, if they rely on their own resources instead of external funding.

B

he risks of vertical integration include all of the following except A. costs and expenses associated with increased overhead and capital expenditures. B. lack of control over valuable assets. C. problems associated with unbalanced capacities along the value chain. D. additional administrative costs associated with managing a more complex set of activities.

B

A firm should consider vertical integration when A. the competitive situation is highly volatile. B. customer needs are evolving. C. the suppliers of raw materials to the firm are unable to maintain quality standards. D. the suppliers of the firm willingly cooperate with the firm.

C

According to Michael Porter, there is a tremendous allure to _________. It is the big play, the dramatic gesture. With one stroke of the pen you can add billions to size, get a front-page story, and create excitement in markets. A. strategic alliances and joint ventures B. internal development C. mergers and acquisitions D. differentiation strategies

C

An antitakeover tactic in which existing shareholders have the option to buy additional shares of stock at a discount to the current market price is called ______. A. greenmail B. a golden parachute C. a poison pill D. scorched earth

C

Diversification initiatives include all of the following except A. mergers and acquisitions. B. strategic alliances. C. shareholder development. D. joint ventures.

C

For a core competence to be a viable basis for the corporation strengthening a new business unit, there are three requirements. Which one of the following is not one of these requirements? A. The competence must help the business gain strength relative to its competition. B. The new business must be similar to existing businesses to benefit from a core competence. C. The new business must have an established large market share. D. The collection of competencies should be unique, so that they cannot be easily imitated.

C

IBM, Memorial Sloan Kettering, and Cedars-Sinai have a _________ whereby IBM receives expert medical knowledge that it uses to leverage its technological skills to develop new medical insights. A. joint diversification B. divestment C. strategic alliance D. global integration

C

If a multinational firm paid too high a premium for the common stock of the company, this can lead to A. expansion. B. cost savings. C. divestiture. D. acquisition.

C

In the BCG Growth Share Matrix, the suggested strategy for Stars is to A. milk them to finance other businesses. B. invest large sums to gain a good market share. C. maintain position and after the market growth slows use the business to provide cash flow. D. not invest in them and to shift cash flow to other businesses.

C

In the BCG Matrix, a business that has a low market share in an industry characterized by high market growth is termed a A. Star. B. Cash Cow. C. Question Mark. D. Dog.

C

Internal development may be time consuming and, therefore, firms may forfeit the benefits of speed that growth through __________ and __________ can provide. A. strategic alliances; joint ventures B. strategic alliances; mergers C. mergers; acquisitions D. mergers; joint ventures

C

Many leading high-tech firms such as Google, Apple, and Intel have dramatically enhanced their revenues, profits, and market values through a wide variety of diversification initiatives. Which of the following is not such an initiative? A. acquisitions B. strategic alliances C. stockholder enhancement D. joint ventures

C

Novartis, formerly Ciba-Geigy, uses portfolio management to improve many key activities, including resource allocation and reward and evaluation systems. This is an example of using A. related diversification to achieve value by leveraging pooled negotiating power to attain economies of scope. B. related diversification to acquire market power by leveraging pooled negotiating power. C. unrelated diversification to acquire financial synergies through portfolio management. D. related diversification to acquire parenting, restructuring, and financial synergies through corporate restructuring and parenting.

C

One of the reasons it is said that only the investment banker wins when a company is acquired is that they A. assure the newly acquired company will be successful. B. continue to work with the two companies involved. C. collect huge up-front fees regardless of the outcome afterwards. D. monitor the progress of both companies for long term growth.

C

Portfolio management matrices are applied to what level of strategy? A. departmental level B. business level C. corporate level D. international level

C

Proctor and Gamble is a large multinational organization that has many business sharing distribution resources. Diversification strategies take advantage of the __________ that exist in their organization. A. costs B. employees C. synergies D. discontinuities Why should compan

C

The antitakeover tactic, _______, is when a firm offers to buy shares of their stock from a company (or individual) planning to acquire their firm at a higher price than the unfriendly company paid for it. A. golden parachute B. poison pill C. greenmail D. scorched earth

C

Vertical integration is attractive when A. internal administrative costs are higher than transaction costs. B. transaction costs and internal administrative costs are equal. C. transaction costs are higher than internal administrative costs. D. search costs are higher than monitoring costs.

C

Which of the following is not part of a good guideline list for managing strategic alliances? A. establishing a clear understanding between partners B. not shortchanging your partner C. relying primarily on a contract to make the joint venture work D. working hard to ensure a collaborative relationship between partners

C

A Cash Cow, in the BCG framework, refers to a business that has A. high market growth and relatively high market share. B. relatively low market share and low market growth. C. relatively low market share and high market growth. D. low market growth and relatively high market share.

D

Antitakeover tactics include all of the following except A. greenmail. B. poison pills. C. golden parachutes. D. golden handcuffs.

D

At Cooper Industries, there are few similarities in the products it makes or the industries in which it completes. The corporate office adds value through such activities as superb human resource practices and budgeting systems. This is an example of using A. related diversification to acquire economies of scope by leveraging pooled negotiating power. B. related diversification to acquire market power by leveraging core competencies. C. unrelated diversification to acquire financial synergies through portfolio management. D. unrelated diversification to acquire parenting, restructuring, and financial synergies through corporate restructuring and parenting.

D

Cooperative relationships such as __________ have potential advantages such as entering new markets, reducing manufacturing (or other) costs in the value chain, and developing and diffusing new technologies. A. franchises B. mergers C. acquisitions D. joint ventures and strategic alliances

D

Divesting of businesses can accomplish many different objectives, except A. enabling managers to focus their efforts more directly on the core businesses of the firm. B. providing the firm with more resources to spend on more attractive alternatives. C. raising cash to help fund existing businesses. D. dispersing manager focus.

D

Firms have several choices of diversification initiatives that can be used to create value. Which of the following is not one of them? A. using related diversification to acquire economies of scope leveraging pooled negotiating power B. using related diversification to acquire market power by leveraging core competencies C. using unrelated diversification to acquire financial synergies through portfolio management D. using related diversification to acquire parenting, restructuring, and financial synergies through corporate restructuring and parenting

D

In 2012, Microsoft admitted to a major _________ mistake when it wrote off essentially the entire 6.2 billion USD it paid for a digital advertising firm, aQuantive, that it purchased in 2007. A. expansion B. divestiture C. cost savings D. acquisition

D

In managing the corporate portfolio, the BCG matrix would suggest that A. Dogs should be invested in to increase market share and become Cash Cows. B. Stars are in low growth markets and can provide excess cash to fund other opportunities. C. Cash Cows require substantial cash outlays to maintain market share. D. Question Marks can represent future Stars if their market share is increased.

D

Lionsgate (a Canadian-American entertainment company) and Alibaba (a Chinese ecommerce company) created _________ to open the Chinese market for the Lionsgate streaming shows and movies. Alibaba profits by getting access to content to increase demand for its own set-top media boxes. A. a joint venture B. a merger C. an acquisition D. a strategic alliance

D

Shaw Industries, a giant carpet manufacturer, increases its control over raw materials by producing much of its own polypropylene fiber, a key input to its manufacturing process. This is an example of using A. related diversification to acquire market power by pooling negotiating power. B. related diversification to acquire economies of scope by leveraging core competencies. C. related diversification to acquire economies of scope by integrating vertically in order to acquire market power. D. related diversification to acquire market power by integrating vertically

D

When management uses common production facilities or purchasing procedures to distribute different but related products, they are A. building on core competencies. B. achieving process gains. C. using portfolio analysis. D. sharing activities.

D

Which of the following is not a reason for merger and acquisition failures? A. The acquiring company pays a premium for the common stock of the target company. B. Top executives act in their best interests rather than those of the shareholders. C. The acquired company assets are poorly integrated into the acquiring company business lines. D. The acquisition leads to value creation.

D