Ch. 7 Strategy Formulation: Corporate Strategy M/C

An agreement between two separate firms to provide agreed-upon goods and services to each other for a specified period of time is known as a(n) a. long-term contract. b. short-term contract. c. binding contract. d. integrated contract. e. outsourced contract.

a

Ford Motor Company's use of company resources to build its River Rouge Plant outside of Detroit so that iron ore could enter into one end of the plant and a finished automobile could exit out of the other end is called a. full internal vertical integration. b. tapered integration. c. horizontal integration. d. external vertical integration. e. quasi integration.

a

One benefit of a U.S. company entering a joint venture with an international firm is the joint venture a. reduces the risks of expropriation. b. enhances the policy of the host country's takeover of the firm. c. promotes skepticism among other countries not involved in the merger. d. encourages competitors to work with the company. e. increases revenues by 20%.

a

One study of various growth projects revealed that the most successful growth strategy was a. vertical growth. b. horizontal growth. c. concentric diversification. d. conglomerate diversification. e. a combination of vertical growth and conglomerate diversification.

a

Strategies that include the flow of financial and other resources to and from a company's product lines and business units can be referred to as a. corporate strategies. b. directional strategies. c. cooperative strategies. d. functional strategies. e. business strategies.

a

The ability for Nike to manufacture its own shoes and then build stores for distribution is an example of a. forward integration. b. horizontal integration. c. backward integration. d. transferred integration. e. mass integration.

a

The most logical strategy for a corporation having a strong competitive position possessing a high market share in a highly attractive industry is a. concentration. b. conglomerate integration. c. concentric diversification. d. stability. e. retrenchment.

a

When a firm internally makes 100% of its key supplies and completely controls its distributors, this is known as a. full integration. b. vertical integration. c. mass integration. d. economical integration. e. strategic integration.

a

Which external growth strategy involves two or more corporations joining in a stock exchange and from which only one corporation survives? (p.139) a. mergers b. strategic alliances c. diversification d. acquisitions e. concentration

a

Which kind of corporate strategy deals with the industries or markets in which the firm competes through its products and business units? a. portfolio strategy b. directional strategy c. parenting strategy d. cooperative strategy e. functional strategy

a

Which one of the following is NOT a characteristic of a firm that has chosen a captive company strategy? a. Probably most appropriate for a company with a strong competitive position in a growing industry. b. The firm reduces its functional activities to reduce costs. c. The firm gains a certainty of sales and production in return for becoming heavily dependent upon another firm for at least 75% of its sales. d. One of its customers makes up a large percentage of the company's sales and wants the company to keep operating as its supplier. e. Management desperately seeks an "angel" to guarantee the company's continued existence.

a

Which strategy is the termination of the firm because it is in an unattractive industry and the company is too weak to be sold as a growing concern? a. liquidation b. bankruptcy c. diversification d. divestment e. consolidation

a

Which strategy specifies the firm's overall direction in terms of its general orientation toward growth, the industries or markets in which it competes, and the manner in which it coordinates activities and transfers resources among business units? a. corporate b. functional c. divisional d. organizational e. business

a

With concentric diversification, the focus is on a. product-market synergy. b. market demand. c. financial considerations. d. diverse product offerings. e. economic indicators.

a

43. According to transaction cost economics, which of the following is NOT a reason for a firm to prefer vertical integration over contracting to purchasing supplies or services in the open market? a. a high level of uncertainty surrounds the transaction. b. a company's management does not want to rely on outsiders for important raw materials. c. the transaction occurs frequently. d. assets involved in the transaction are highly specialized. e. all of the above are reasons to favor contracting over vertical integration.

b

49. Which strategy did KLM choose when it joined forces with Northwest Airlines? a. A retrenchment strategy using horizontal integration through internal means. b. A horizontal integration strategy. c. A stability strategy using concentric diversification. d. A growth strategy using vertical integration through external means. e. A retrenchment strategy using a concentration method.

b

All of the following factors reflect transaction costs EXCEPT (p.141) a. drafting a market agreement. b. selling a market agreement. c. negotiating a market agreement. d. safeguarding a market agreement. e. settling disput

b

An MNC uses which international strategy for entering a foreign market by associating itself with a firm in the host country or a government agency in that country to combine resources and expertise needed for the development of a new product or technologies? a. licensing b. joint ventures c. production sharing d. exporting e. acquisitions

b

The collection of unused resources of a company is known as a. organizational trash. b. organizational slack. c. organizational capacity. d. organizational acquisition. e. organizational formula.

b

The controversy surrounding external versus internal growth finds a. external growth appears to be superior financially to internal growth. b. internal growth appears to be superior financially to external growth. c. there appears to be no financial advantage to either. d. acquisitions have a lower survival rate than new internally generated business ventures. e. strategic alliances are superior to both.

b

The purpose of vertical growth is to a. take over a function previously supplied by a former employer. b. take over a function previously provided by a supplier or by a distributor. c. acquire a company of similar objective. d. sell a company encumbered with debt. e. expand to countries with strong trade alliances.

b

When resources are purchased from outsiders through long-term contracts instead of being made in-house, this process is referred to as (p.142) a. insourcing. b. outsourcing. c. resource building. d. resource placement. e. resource allocation.

b

Which external growth strategy is a partnership of two or more corporations or business units to achieve mutually beneficial strategic objectives? a. mergers b. strategic alliances c. diversification d. acquisitions e. concentration

b

Which kind of corporate strategy deals with the firm's overall orientation toward growth? a. portfolio strategy b. directional strategy c. parenting strategy d. cooperative strategy e. functional strategy

b

Which one of the following directional strategies is most frequently used in corporations? (p.138) a. stability b. growth c. consolidation d. retrenchment e. expansion

b

Which strategy involves giving up management of the firm to the courts in return for some settlement of the corporation's obligations? a. liquidation b. bankruptcy c. diversification d. divestment e. consolidation 

b

Which strategy is most appropriate for a company in an industry in which the future is expected to continue as an extension of the present? a. horizontal integration strategy b. no change strategy c. retrenchment strategy d. pause/proceed with caution strategy e. profit strategy

b

With conglomerate diversification, the focus is on a. product-market synergy. b. financial considerations. c. employee satisfaction. d. similar product offerings. e. market demand.

b

60. An MNC uses which international strategy for entering a foreign market by combining the higher labor skills and technology available in the developed countries with the lower cost labor available in the developing countries? a. licensing b. joint ventures c. production sharing d. exporting e. acquisitions

c

71. Which strategy is most appropriate for a corporation having a weak competitive position regardless of the industry's attractiveness, resulting in poor performance, decreased sales and lost profits? a. proceed with caution strategy b. no change strategy c. retrenchment strategy d. pause strategy e. profit strategy

c

Adding a related or complementary product to a corporation's business units is called a. concentration. b. horizontal growth. c. concentric diversification. d. vertical growth. e. conglomerate diversificatio

c

As defined by the text, synergy is the concept a. that involves adding different products or divisions to the corporation. b. that supports the acquisition of one corporation by another. c. that two firms can generate more profits together than separately. d. that a corporation can enter one or more businesses that are necessary to manufacture its own product. e. that two functional areas of a corporation can coordinate their work as a team.

c

In international dealings, greenfield development is/are (p.145) a. a way in which an MNC may contract with a foreign government or local firm to trade raw materials for certain resources belonging to the MNC. b. a way in which an MNC can take total control of operations by acquiring a firm already established in the host country. c. when a corporation chooses to build a facility from scratch allowing it the freedom to design the plant, choose suppliers, and hire its work force. d. when an MNC has a large amount of management talent available and chooses to use its personnel to assist a firm in a host country for a specified fee and period of time. e. typically contracts for construction of operating facilities in exchange for a fee.

c

One of the most popular aids to developing corporate strategy in multibusiness corporations views business units in terms of the cash they generate and is called a. PIMS. b. segmentation analysis c. portfolio analysis. d. industry analysis. e. diversification study.

c

Research comparing concentric with conglomerate diversification concludes that a. conglomerate diversification is always less profitable than concentric diversification. b. concentric diversification is always less profitable than conglomerate diversification. c. the relationship between relatedness and performance is curvilinear. d. neither concentric or conglomerate diversification are ever profitable. e. for optimum effectiveness both conglomerate and concentric diversification should be utilized in tandem.

c

The purchase of Carroll's Foods for its hog-growing facilities by Smithfield Foods, the world's largest pork processor, is an example of a. forward integration. b. horizontal integration. c. backward integration. d. transferred integration. e. mass integration.

c

The theory that proposes that vertical integration is more efficient than contracting for goods and services in the marketplace when the transaction costs of buying goods on the open market becomes too great is known as a. population theory. b. institution theory. c. transaction cost economics. d. trickle down economics. e. transaction growth theory.

c

What is a turnaround strategy? a. A form of divestment and is appropriate when corporate problems can be traced to the poor performance of an SBU or product line. b. Occurs when the corporation reduces the scope of some of its functional activities and becomes "captive" to another firm. c. Emphasizes improving operational efficiency and is appropriate when a corporation's problems are pervasive, but not yet critical. d. Occurs when a corporation liquidates all its assets. e. It involves adding different products or divisions to the corporation.

c

Which kind of corporate strategy deals with the manner in which the firm coordinates activities and transfers resources and cultivates capabilities among product lines and business units? (p.137) a. portfolio strategy b. directional strategy c. parenting strategy d. cooperative strategy e. functional strategy

c

55. An MNC uses which international strategy for entering a foreign market by simply shipping goods produced in the company's home country to other countries for marketing to minimize risk and to experiment with a specific product? a. licensing b. joint ventures c. production sharing d. exporting e. acquisitions

d

A firm that produces part of its own requirements and buys the rest from outside suppliers is what type of vertical integration? a. full integration b. longterm contracts c. backwards integration d. taper integration e. quasi integration

d

In many cases, _____ integration is more profitable than _____ integration. (p.140) a. forward, backward b. vertical, backward c. backward, vertical d. backward, forward e. mass, forward

d

Management contracts are used in international dealings a. as a way in which an MNC may contract with a foreign government or local firm to trade raw materials for certain resources belonging to the MNC. b. as a way in which an MNC can take total control of operations by either starting a business from scratch or acquiring a firm already established in the host country. c. when a corporation chooses to build a facility from scratch allowing it the freedom to design the plant, choose suppliers, and hire a work force. d. when an MNC has a large amount of management talent available and chooses to use its personnel to assist a firm in a host country for a specified fee and period of time. e. when an MNC typically contracts for construction of operating facilities in exchange for a fee.

d

The rate of joint venture formation between U.S. companies and international partners has been growing _____ annually since 1985. a. 5% b. 7% c. 17% d. 27% e. 37%

d

The stability strategy is appropriate for all BUT ONE of the following circumstances? a. Useful in the shortrun but can be dangerous if followed too long. b. Most appropriate for reasonably successful corporations in a reasonably predictable environment. c. Appropriate when the industry is facing modest or nogrowth potential. d. Appropriate when the industry is in decline. e. Key environmental forces are in the process of unpredictable change.

d

Which external growth strategy occurs when a corporation is completely absorbed as an operating subsidiary or division of the acquiring firm? a. mergers b. strategic alliances c. diversification d. acquisitions e. concentration

d

Which of the following is NOT descriptive of the characteristics of conglomerate diversification? a. Timing is critical to ensure entry into the industry before competitors. b. Indicated when managers are primarily concerned with the criterion of return on investment. c. Emphasis is on financial synergy rather than on the productmarket synergy. d. Appropriate for companies wishing to take advantage of their competitive position strengths as they diversify out of an unattractive industry. e. May be appropriate corporate strategy when a firm's competitive position is only average and industry attractiveness is low.

d

Which strategy is most appropriate as a temporary strategy to enable a corporation to consolidate its resources after prolonged rapid growth in an industry now facing an uncertain future? a. horizontal integration strategy b. no change strategy c. retrenchment strategy d. pause/proceed with caution strategy e. profit strategy

d

A firm which gets most of its requirements from an outside supplier that is under its partial control is what type of vertical integration? (p.141) a. full integration b. longterm contracts c. backwards integration d. taper integration e. quasi integration

e

A firm's expansion into other geographic locations and/or increasing the range of products and services offered to current markets is called a. forward vertical growth. b. diversification c. backward vertical growth. d. captive company strategy. e. horizontal integration.

e

An MNC uses which international strategy for entering a foreign market by purchasing another company already operating in the area developing synergistic benefits gained from acquiring strong complementary product lines and a good distribution network? a. licensing b. joint ventures c. production sharing d. exporting e. acquisitions

e

Growth through diversification out of an industry into an unrelated industry is called a. concentration. b. horizontal growth. c. concentric diversification. d. vertical growth. e. conglomerate diversification.

e

In international dealings, turnkey operations are (p.145) a. a way in which an MNC may contract with a foreign government or local firm to trade raw materials for certain resources belonging to the MNC. b. a way in which an MNC can take total control of operations by either starting a business from scratch or acquiring a firm already established in the host country. c. when a corporation chooses to build a facility from scratch allowing it the freedom to design the plant, choose suppliers, and hire a work force. d. when an MNC has a large amount of management talent available and chooses to use its personnel to assist a firm in a host country for a specified fee and period of time. e. typically contracts for construction of operating facilities in exchange for a fee.

e

In the Boston Consulting Group's growthshare matrix, the relative competitive position of a product, division, or corporation is defined as a. its market share. b. its gross sales divided by its market share. c. its market share multiplied by that of its nearest competitor. d. its market share divided by that of the smallest other competitor. e. its market share divided by that of the largest other competitor.

e

The strategy which takes place in two basic phases of contraction and consolidation is a. merger. b. liquidation c. integration. d. divestment. e. turnaround.

e

Which of the following is NOT a reason why the growth strategy is so seductive? a. There are more opportunities for advancement and promotion. b. A corporation that experiences successful growth is thought of positively by the marketplace and potential investors. c. A large and growth oriented corporation has more clout and influence. d. A growing firm can cover up mistakes and inefficiencies because of the increase in cash flow revenue. e. A large and growing firm attracts more acquisition offers.

e

Which strategy is descriptive of a corporation in a mature industry facing a drop in its attractiveness, opting to decrease shortterm discretionary expenses to maintain profits at a certain level? (p.147) a. horizontal integration strategy b. no change strategy c. retrenchment strategy d. pause/proceed with caution strategy e. profit strategy

e