BA7080 Final
A dominant design is best described as: A. A common product architecture B. The culmination of the process of commodification that accompanies industry evolution C. The product design chosen by the leading firm in an industry D. A technical standard
A. A common product architecture
The field of "organizational ecology" studies: A. Changes in the evolution of the population of firms in an industry. B. Companies' contributions to environmental sustainability. C. The process of competition between different types of firm. D. Management practices that promote the evolutionary adaptation of firms.
A. Changes in the evolution of the population of firms in an industry.
Which of the following product categories offers the greatest potential for differentiation? A. Clothes and restaurants B. Jet fuel for airline jets C. Cement and wheat D. Sulfur and ethylene
A. Clothes and restaurants
When diversification combines two businesses in different industrial sectors, the key determinant of whether the diversification creates value is whether the diversification: A. Enhances the competitive advantage of either or both of the two businesses. B. Changes the debt/equity ratio of the combined company. C. Is between culturally-compatible businesses. D. Causes management to lose its focus on its core business.
A. Enhances the competitive advantage of either or both of the two businesses.
A firm's competitive advantage is not necessarily revealed in higher profitability; it may be reflected in: A. Expanding market share and/or increasing employee bonuses B. An aggressive quest for acquisitions C. Increasing employee bonuses D. Expanding market share
A. Expanding market share and/or increasing employee bonuses
"Shakeout"—a period when many firms exit from an industry following a period of intense competition—characterizes an industry's transition from: A. From growth to maturity. B. From maturity to decline. C. From product innovation to process innovation. D. Introduction to growth stage.
A. From growth to maturity.
The growth in the scope of business enterprises for most of the 19th and 20th centuries can be attributed to a drop in administrative costs of firms relative to the transaction costs of market. This resulted from: A. Innovation in information and communications technology and in management B. Globalization C. The growing transaction costs of markets as a result of taxes, regulation, and litigation D. The monopolistic power of large firms to raise prices and push down wages
A. Innovation in information and communications technology and in management
In order for a manufacturer of consumer goods to maximize responsiveness to changes in consumer demand for its products: A. It depends upon the type of flexibility that is desired. B. It is best to outsource the production of components and materials. C. It is best to be backward integrated into the production of components and materials. D. It is best to be partially backward integrated.
A. It depends upon the type of flexibility that is desired.
A technical standard tends to emerge in an industry if: A. Network effects exist B. Economies of scale are present C. The industry has converged around a dominant design D. The industry is subject to economies of learning
A. Network effects exist
Firm entry rates tend to be highest during the growth stage of an industry life cycle because: A. Shortage of production capacity keeps margins attractive and growing legitimacy of the industry attracts resources to the industry B. Growing legitimacy of the industry attracts resources to the industry. C. The propensity for entrepreneurs and venture capitalists to imitate one another. D. Shortage of production capacity keeps margins attractive.
A. Shortage of production capacity keeps margins attractive and growing legitimacy of the industry attracts resources to the industry
Which of the following is not a source of organizational inertia? A. The hierarchical structure of organizational capabilities where dynamic capabilities reside at a higher level than operational capabilities B. Complementarities between the different activities of a firm C. Organizational routines D. The tendency for organizations to limit themselves to local search
A. The hierarchical structure of organizational capabilities where dynamic capabilities reside at a higher level than operational capabilities
The difference between a "generic" and a "contextual" management practices is: A. The performance impact of a generic practice is independent of the firm's other practices; the impact of a contextual practice depends upon the firm's other practices. B. Generic practices relate to basic functions; contextual practices tend to be more idiosyncratic. C. None: the concepts are identical in practice. D. A generic practices offers incremental performance improvement; a contextual practices leads to a new fitness peak.
A. The performance impact of a generic practice is independent of the firm's other practices; the impact of a contextual practice depends upon the firm's other practices.
The main lesson to be drawn from the delays to the launch of Boeing's 787 Dreamliner is that, when developing complex products that embody diverse new technologies: A. The principal firm must possess well-developed integration capabilities. B. A competitor such as Airbus Industries which began as an alliance among a number of separate companies will always have an advantage. C. It is best to do it in-house without heavy reliance on external suppliers. D. Extensive outsourcing is inevitable as no single company has sufficient technological capabilities in-house.
A. The principal firm must possess well-developed integration capabilities.
The different stages of the industry life cycles are defined primarily on the basis of: A. The rate of growth of industry sales B. None of the above C. The pace of innovation within the industry D. The characteristics of competition within the industry
A. The rate of growth of industry sales
Which of the following developments is not a typical feature of the transition from the "introductory" to the "growth" phase of the industry life cycle? A. The shift of production from mature to emerging countries B. The shift from product to process innovation C. The emergence of a dominant design D. Rapid market penetration
A. The shift of production from mature to emerging countries
What does the expression "conglomerate discount" mean? A. The stock market tends to value diversified companies at less than their break-up value. B. The willingness of stock exchanges to offer discounted listing fees in order to attract highly diversified firms. C. The ability of a widely diversified firm to exploit economies of scope to reduce its overall costs. D. The lower rates of return that highly diversified companies offer to their shareholders.
A. The stock market tends to value diversified companies at less than their break-up value.
Which of the following factors is not an explanation for the lack of vertical integration between steel producers and shipbuilders? A. The world's biggest shipbuilding countries (South Korea, Japan, and China) are also among the leading steel producing countries B. Steel is a commodity product available in standardized grades C. Steel production and shipbuilding are strategically very different industries D. The market for steel has many suppliers and buyers, good information flows, and little need for transaction-specific investments
A. The world's biggest shipbuilding countries (South Korea, Japan, and China) are also among the leading steel producing countries
Causal ambiguity allows a firm's competitive advantage to be sustained because potential rivals are: A. Unable to identify the sources of the advantaged firm's superior performance B. All of the above C. Unable to acquire the resources needed to compete against the advantaged firm D. Deterred from directly competing with the advantaged firm
A. Unable to identify the sources of the advantaged firm's superior performance
The corporate scope of Walt Disney Company may be described as follows: A. A broad vertical and geographical scope but narrow product scope B. A broad product, geographical and vertical scope. C. A broad product and vertical scope, but a narrow geographical scope D. A broad product and geographical scope, but narrow vertical scope
B. A broad product, geographical and vertical scope.
An organizational routine is: A. A new capability after it has been institutionalized within an organization B. A stable, repeatable, pattern of coordinated activity among organizational members C. The resource needed to create a new capability D. A lower-level, operational capability, as opposed to a dynamic capability which tends not to be routinized
B. A stable, repeatable, pattern of coordinated activity among organizational members
Advertising costs as a percentage of sales revenue for soft drink brands with large market shares (such as Coca-Cola and Pepsi-Cola) are lower than for brands with small market shares (Dr. Pepper, Schweppes, Fresca). This is because: A. Big brands can negotiate lower rates with advertising agencies and media owners B. Advertising campaigns are subject to a large minimum budgets ("indivisibilities") C. Economies of learning—long-established brands such as Coca-Cola and Pepsi have learned how to be more efficient in their advertising campaigns D. Economies of global advertising campaigns
B. Advertising campaigns are subject to a large minimum budgets ("indivisibilities")
Where do general management capabilities generally reside within the diversified firm? A. All of the above B. At the corporate level C. At the operational entity level D. At the divisional level
B. At the corporate level
Isolating mechanisms are: A. Mechanisms that impede the equilibration of rents between industries B. Barriers to the erosion of interfirm profit differentials C. Sources of disequilibrium that cause the profitability of different firms in an industry to diverge over time D. The same as "barriers to mobility"
B. Barriers to the erosion of interfirm profit differentials
Which of the following factors is not conducive to vertical integration between two adjacent stages of production? A. Similarity of the optimum scale of production between the two stages B. Different organizational capabilities are required at each stage C. Stability in the technologies used at each stage D. Few companies at each of the two stages
B. Different organizational capabilities are required at each stage
According to Porter, cost leadership and differentiation are: A. Two names for the same fundamental strategy B. Distinct generic strategies C. What leads a firm to "be stuck in the middle" D. Strategies that can be pursued simultaneously
B. Distinct generic strategies
As markets become more turbulent and unpredictable, quick-response capability depends primarily upon: A. Good forecasting B. Early identification of emerging changes together with speed in responding to them C. Early identification of emerging changes D. Speed of response
B. Early identification of emerging changes together with speed in responding to them
Starbucks owns and operates most of its retail outlets; McDonalds franchises most of its retail outlets. An advantage of franchising over vertical integration is: A. Franchising is always more profitable than vertical integration because the franchisor does not bear the costs of owning the retail outlets and paying their staff. B. Franchising subjects the operators of retail outlets being subject to "high-powered" incentives. C. Franchising permits more effective quality control of the retail outlet. D. Franchising permits superior coordination of retail activities with upstream activities.
B. Franchising subjects the operators of retail outlets being subject to "high-powered" incentives.
An alternative approach to Porter's "three essential tests" in evaluating the value-adding potential of diversification is: A. Porter's value chain analysis. B. Goold, Campbell and Alexander's "corporate parenting" framework. C. The Ansoff matrix. D. The Boston Consulting Group growth-share matrix.
B. Goold, Campbell and Alexander's "corporate parenting" framework.
The duration of the industry life cycle: A. Is determined by the longevity of the firms within the industry B. Has become compressed as the pace of technological change has accelerated C. Depends upon the ability the industry to sustain innovation D. Typically extends over a century or more
B. Has become compressed as the pace of technological change has accelerated
"Experience goods" are those which: A. Only firms with wide experience in an industry would rationally consider making B. Have performance attributes that are difficult to ascertain at the moment of purchase C. Have been produced by the firm furthest down the learning curve D. Only customers with previous experience of using these goods would rationally consider purchasing
B. Have performance attributes that are difficult to ascertain at the moment of purchase
A firm can pre-empt competitors from invading its market space by: A. Threatening to imitate its imitators B. Introducing new products to fill each niche, investing in capacity ahead of market growth and filing many patents C. Vigorous legal action D. None of these: competitive imitators is inevitable and unstoppable
B. Introducing new products to fill each niche, investing in capacity ahead of market growth and filing many patents
Several decades of empirical evidence indicates that the relationship between diversification and performance: A. Is mainly positive B. Is neither consistent nor systematic C. Varies between countries D. Is negative unless it is diversification between closely related industries
B. Is neither consistent nor systematic
Which is a more efficient mechanism for allocating capital among different businesses: the internal capital allocation of diversified firms or the external capital market? A. The internal capital allocation process of diversified firms. B. It depends on the effectiveness of the specific firm's capital allocation process and the efficiency of the capital market in the country where the firm is located. C. It depends on the effectiveness of the specific firm's capital allocation process. D. The external capital market.
B. It depends on the effectiveness of the specific firm's capital allocation process and the efficiency of the capital market in the country where the firm is located.
The characteristic profile of an industry life cycle has an 'S' shaped curve because: A. It reflects the changing pace at which technology is diffused. B. It is the result of changes in rates of growth of market demand. C. It is modeled on the Product Life Cycle, which is also 'S' shaped. D. It is generated by a quadratic function.
B. It is the result of changes in rates of growth of market demand.
When a company in industry A acquires a company in industry B, Porter's "better-off" test is satisfied when: A. There are shared resources and capabilities between the two businesses B. The competitive advantage of either or both businesses is increased C. The competitive advantage of the business B is increased D. The competitive advantage of business A is increased
B. The competitive advantage of either or both businesses is increased
The capitalist economy comprises two forms of economic organization, the market mechanism operated by prices and the administrative mechanism of firms. A. The notion of the capitalist economy as governed by market processes is a myth. In reality the global capitalist economy is controlled by large corporations. B. The market mechanism is referred to as the "invisible hand" while the administrative mechanism of firms is referred to as the "visible hand". C. The market mechanism is referred to as the "visible hand" while the administrative mechanism of firms is referred to as the "invisible hand". D. The simultaneous operation of both "hands" means that the capitalist system is often referred to as an "ambidextrous organization".
B. The market mechanism is referred to as the "invisible hand" while the administrative mechanism of firms is referred to as the "visible hand".
Porter's "three essential tests" help to determine: A. The impact of diversification on stakeholders. B. The potential for diversification to create shareholder value. C. The likely impact of diversification upon risk. D. How the financial markets would react to a diversification.
B. The potential for diversification to create shareholder value.
Vertical integration by Zara, the main division and brand of the Spanish clothing firm Inditex, illustrates: A. The potential of vertical integration to offer flexibility in responding to seasonal fluctuations in demand. B. The potential for vertical integration to offer flexibility in responding to rapid changes in customer product preferences. C. The potential for vertical integration to overcome problems arising from the need for transaction-specific investments by garment manufacturers. D. The potential for vertical integration to exploit technical economies from co-locating adjacent processes.
B. The potential for vertical integration to offer flexibility in responding to rapid changes in customer product preferences.
According to institutional sociologists, the propensity for organizations to adopt similar structures ("institutional isomorphism") is primarily a result of: A. Bounded rationality. B. The propensity of firms to imitate one another in order to gain legitimacy. C. Common key success factors within an industry. D. The complementarity among different managerial practices within firms' "activity systems".
B. The propensity of firms to imitate one another in order to gain legitimacy.
When an industry is subject to technological change, the ability of new entrants to displace incumbent firms will be increased if: A. Incumbent firms are geographically dispersed. B. The technological change represents an architectural innovation rather than component innovation. C. Incumbent firms are insufficiently attentive to the industry's largest customers. D. The technological change is competence enhancing rather than competence destroying.
B. The technological change represents an architectural innovation rather than component innovation.
When an industry is subject to externally generated changes, the firms which are most likely to establish a competitive advantage are: A. Those with the highest market share. B. Those that that respond most quickly to the change and have the resources and capabilities that are most closely aligned to the emerging success factors. C. All of the above D. Those with the greatest agility and capacity for innovation.
B. Those that that respond most quickly to the change and have the resources and capabilities that are most closely aligned to the emerging success factors.
Competitive advantage can be defined as: A. A firm's ability to grow faster than its competitors. B. A firm's ability to establish market leadership. C. A firm's potential to earn a rate of profit that is persistently higher than its rivals. D. A firm's potential for launching innovative new products.
C. A firm's potential to earn a rate of profit that is persistently higher than its rivals.
The failure of empirical research to find unambiguous evidence that related diversification outperforms unrelated evidence points to: A. The fact that firm performance is the outcome of many factors of which diversification strategy is only one. B. Reverse causation: it may be that poorly performing firms are more likely to take the risk of unrelated diversification. C. All of the above D. Difficulties in determining whether diversification is related or unrelated.
C. All of the above
The internal labor market provides a large, diverse firm with the chance to make savings, by: A. Relying less on external recruitment consultants B. Developing senior managers with wide experience C. All of the above D. Having first-hand knowledge of a large pool of internal recruits for transfer between businesses
C. All of the above
The opening quotation from Tom Peters states that as "yesterday's highly integrated giants" de-integrate, their vertical relationships are taking the form of: A. Long-term contracts B. All of the above C. Alliances and partnerships D. Market contracts
C. Alliances and partnerships
The opening quotation concerning Bath Fitter illustrates the following benefits of vertical integration: A. None of the above B. Economies of scale C. Avoiding the transactions costs involved monitoring and enforcing contracts with external suppliers. D. Technical economies from the physical integration of processes
C. Avoiding the transactions costs involved monitoring and enforcing contracts with external suppliers.
With the onset of the maturity stage, the number of firms in most industries: A. Rises sharply until shake-out is triggered B. Rises C. Decreases significantly, then stabilizes D. Remains stable
C. Decreases significantly, then stabilizes
The key difference between economies of scale and economies of scope: A. There is no practical difference. B. Scale economies are relevant to business strategy; economies of scope to corporate strategy. C. Economies of scale relate to expanding the output of a single product; economies of scope relate to expansion across multiple products. D. Economies of scale relate to manufacturing activities; economies of scope relate to a wide range of functions.
C. Economies of scale relate to expanding the output of a single product; economies of scope relate to expansion across multiple products.
When a winery opens a tasting room through which it sells its wine to visitors, this represents: A. Partial integration B. Backward integration C. Forward integration D. Diversification
C. Forward integration
The continuing prominence of large, highly diversified business groups in many emerging market countries (e.g. Tata Group in India) is mainly the result of: A. Barriers to direct investment which protect these companies from overseas competition B. The failure of emerging market business leaders to appreciate the benefits of refocusing C. High transaction costs in capital and labor markets in these countries which favor the deployment of resources within large diversified corporations D. The political connections of a few leading business leaders
C. High transaction costs in capital and labor markets in these countries which favor the deployment of resources within large diversified corporations
Which of the following factors has not contributed to the trend towards outsourcing in recent decades? A. Increasing turbulence of the business environment B. Increasing emphases on the need for competitive advantage based upon superior capabilities C. Increasing emphasis of the need for speed D. The advent of the internet
C. Increasing emphasis of the need for speed
The British fashion company, Burberry, is considering diversifying into the hotel business. Its optimal strategy is to: A. Establish a separate start-up company, Burberry Hotels, in which Burberry Group retains a minority equity holding B. Stay away from hotels all together since this business is unrelated to Burberry's core fashion business C. License its brand to an existing hotel operator—that way it can avoid the costs and risks of having to invest in all the resources and capabilities required by the hotel business D. Set up its own luxury hotel chain—that way it can appropriate all the profits from the venture
C. License its brand to an existing hotel operator—that way it can avoid the costs and risks of having to invest in all the resources and capabilities required by the hotel business
Firms pursuing differentiation advantages will implement their strategies differently from those pursuing cost advantages. The implementation of differentiation strategy is likely to feature: A. High levels of outsourcing B. Employee remuneration based upon individual productivity C. Low levels of job specialization D. Frequent performance reporting
C. Low levels of job specialization
In retailing, the cost advantages of large retail chains (such as Wal-Mart in the US, Tesco in Britain, Metro in Germany, and Carrefour in France) is primarily the result of: A. Scale economies in operating large individual retail units. B. Higher capacity utilization in retailing and distribution C. Lower costs of bought-in products as a result of superior bargaining power D. Using superior bargaining power to pay lower wage rates
C. Lower costs of bought-in products as a result of superior bargaining power
In supplying "lifestyle" products which are designed to meet consumers' social and psychological needs, the key to differentiation advantage is: A. A relentless pursuit of quality B. Thorough market research C. Product integrity D. Market segmentation
C. Product integrity
The main forces driving industry evolution are: A. The quest for cost and differentiation advantage B. Government policies and global financial flows C. Technology and demand D. Technology and globalization
C. Technology and demand
The vertical scope of a firm relates to: A. The proportion of the firm's inputs that are produced in-house. B. The number of hierarchical layers of the firm's management structure. C. The extent to which a firm owns adjacent stages of the industry value chain. D. The size of the firm's value added.
C. The extent to which a firm owns adjacent stages of the industry value chain.
Vendor partnerships based on relational contacts—such as the relationships between Toyota and its major component suppliers—are more successful than either pure market contracts or vertical integration because: A. They offer similar benefits of high-powered incentives and flexibility that market contracts. B. They give the buyer immense bargaining power over its suppliers. C. They combine the coordination benefits of vertical integration with the incentive and flexibility benefits of market contracts. D. They offer similar coordination benefits as vertical integration.
C. They combine the coordination benefits of vertical integration with the incentive and flexibility benefits of market contracts.
Banks spend more money on their head office buildings than most other large corporations because: A. They tend to be located in financial centers where property prices are high B. Their CEOs are more committed to the display of wealth than other CEOs C. They offer "experience goods", hence they need to signal wealth and stability D. Because their products are essentially commodities, they need to find alternative ways of differentiating
C. They offer "experience goods", hence they need to signal wealth and stability
The reason that the producers of wood pulp have often forward integrated into the production of paper is: A. To insulate the firm from fluctuations in the price of wood pulp. B. To increase value added by moving closer to the final customer. C. To exploit technical economies of co-locating pulp and paper making plants while avoiding transaction costs caused by transaction-specific investments. D. To be able to respond quicker to demand fluctuations because of superior coordination.
C. To exploit technical economies of co-locating pulp and paper making plants while avoiding transaction costs caused by transaction-specific investments.
Vertical integration is: A. A firm establishing close relationships with its suppliers and its buyers B. A firm's acquisition of a supplier or one of its buyers C. A firm's control over its input sources and the distribution of its output D. A firm's ownership of vertically related activities
D. A firm's ownership of vertically related activities
The main cause of downsizing, refocusing, and outsourcing during the latter part of the 20th century was: A. The size of the firm B. All of the above C. None of the above D. A greater turbulence in the environment and also developments in IT—especially the advent of the internet
D. A greater turbulence in the environment and also developments in IT—especially the advent of the internet
Which of the following is not an isolating mechanism? A. Competitive advantage which is based upon the interaction of a number of different resources and capabilities. B. Competitive advantage based upon resources that are difficult to transfer and slow to replicate. C. Private ownership of a company which means that it is not obliged to publish its financial statements. D. Competitive advantage based upon exploiting pricing anomalies.
D. Competitive advantage based upon exploiting pricing anomalies.
The statement: "Economies of scope in shared resources do not provide a sufficient justification for diversification" is: A. Incorrect: economies of scope are sufficient grounds for diversification on their own. B. Incorrect: the benefits from economies of scope need to exceed the administrative costs of the corporate HQ. C. Correct: Cost savings form shared resources are of little value unless there are also organizational capabilities that can be transferred between the businesses. D. Correct: to justify diversification economies of scope need to be supported by transactions costs in the market for the particular resources.
D. Correct: to justify diversification economies of scope need to be supported by transactions costs in the market for the particular resources.
What is the difference between differentiation and segmentation? A. There is no difference between the two B. Segmentation is the head of the marketing department's responsibility, whereas the CEO is in charge of differentiation C. Differentiation is a firm's strategic choice, whereas segmentation is given by its environment D. Differentiation deals with the "how" a firm chooses to compete, while segmentation describes "where" in the entire market a firm chooses to compete
D. Differentiation deals with the "how" a firm chooses to compete, while segmentation describes "where" in the entire market a firm chooses to compete
The reluctance of shipping companies to switch from sail to steam propulsion can be attributed to the fact that: A. Shipping company owners were over the environmental impact of coal burning ships B. The owners of shipping company were resistant to new technology C. Complementary resources such as engineers and coaling stations were scarce D. For several decades after the introduction of steam ships, sailing ships were faster, cheaper, and more reliable
D. For several decades after the introduction of steam ships, sailing ships were faster, cheaper, and more reliable
Compared with simple products like flour or toilet paper, complex products such as cars or hotels: A. Fewer opportunities for differentiation B. Offer similar opportunities for differentiation--it all depends upon the creativity of product designers and marketers C. Fewer incentives for differentiation because of their high costs D. Greater potential for differentiation
D. Greater potential for differentiation
The examples of Ikea and Southwest Airlines demonstrate: A. The power of brand as a factor of success B. The quality of the top management of these firms C. The power of advertising D. How a cost-leadership strategy can be combined with distinctive product differentiation
D. How a cost-leadership strategy can be combined with distinctive product differentiation
Diversification whose sole impact is to reduce the variability of profits does not create value for shareholders because: A. Shareholders are interested in return more than in risk. B. The most important risks (such as a global financial crisis or the collapse of the Euro) are systemic in nature, against which diversification offers little protection. C. The risk which is relevant to stock market valuations is perceived risk--this bears little relationship to profit variability. D. If investors can spread risk by diversifying their portfolios, diversification adds no additional value in terms of risk spreading.
D. If investors can spread risk by diversifying their portfolios, diversification adds no additional value in terms of risk spreading.
Despite the heterogeneity of the goods and services supplied by General Electric (e.g. locomotives and consumer credit), we can consider GE's diversification to be into strategically related industries because: A. It operates a balanced portfolio of cash generating and cash using businesses. B. It is continually looking for opportunities to generate additional revenues from cross-selling and product bundling. C. Most products are supplied under the GE brand. D. It applies similar general management capabilities across all its businesses.
D. It applies similar general management capabilities across all its businesses.
The transition from the introduction to growth phase of the industry life cycle features: A. Increasing product differentiation B. Offshoring of production C. Declining innovation D. Product innovation giving way to process innovation
D. Product innovation giving way to process innovation
Vertical integration by industrial firms during the major part of the 20th century was motivated primarily by firms' desire for: A. Reducing costs B. Increasing speed C. Securing scare inputs D. Reducing risk and improving coordination
D. Reducing risk and improving coordination
Which of the following is not an example of an economy of scope from diversification? A. Fuji Film applying its thin-film, coatings, and polymer technologies not only to photographic film, but also to cosmetics. B. Samsung Group applying its Samsung brand name across a wide range of products. C. Amazon using its server capacity to enter cloud computing and web hosting. D. Royal Dutch Shell engaging in forest development in order to offset some of the carbon dioxide produced by its petroleum business.
D. Royal Dutch Shell engaging in forest development in order to offset some of the carbon dioxide produced by its petroleum business.
Diversification decisions by firms involve the following key issues: A. The benefits of synergy relative to the costs or coordination. B. The potential for the diversification to increase growth and reduce risk. C. The opportunities for exploiting economies of scope in resources and capabilities. D. The attractiveness of the industry to be entered and the potential for competitive advantage.
D. The attractiveness of the industry to be entered and the potential for competitive advantage.
The emergence of "conglomerates"—widely diversified companies—during the 1960s and 1970s was a result of: A. Loose monetary policies that increased the availability of corporate finance. B. The desire of companies to escape low growth industries. C. The willingness of some CEOs to ignore shareholder interests and order to build large corporate empires. D. The belief that the tools of strategic and financial management could be applied to any type of business.
D. The belief that the tools of strategic and financial management could be applied to any type of business.
Industries change mainly as a result of: A. Changing customer preferences. B. Continuous adaptation by a constant population of firms. C. Government policies. D. The death of existing firms and the birth of new firms.
D. The death of existing firms and the birth of new firms.
Which statement best described the extent to which different industries conform to the same life cycle pattern? A. Different go through a renewal of their fife cycle at different stages of their development B. The same stages exist whatever the industry C. All industries have experienced a shortening of the stages of their life cycle D. The duration of the life cycle varies from industry to industry
D. The duration of the life cycle varies from industry to industry
The key drivers of diversification during the period 1950-80 were: A. Shareholder value maximization. B. The desire to escape mature sectors and enter new, technology-based industries. C. The quest to exploit economies of scope. D. The quest for growth and risk reduction.
D. The quest for growth and risk reduction.
Corporate strategy decisions are concerned with: A. Establishing competitive advantage B. Diversification and vertical integration C. The geographical boundaries of the firm D. The scope of the firm's activities
D. The scope of the firm's activities
The term "competency trap", refers to: A. The hubris that affects the senior managers of successful firms. B. The tendency for firms with competitive advantage based in one industry to fail when they diversify into a new industry. C. The tendency for managers to be reluctant to change the strategies that brought them their initial success. D. The tendency for capabilities based on highly developed organizational routines to be a source of inflexibility.
D. The tendency for capabilities based on highly developed organizational routines to be a source of inflexibility.
