BUS4950 Final Review
Currently, the rationale for making an acquisition includes each of the following:
-to increase market power -to overcome entry barriers -to increase diversification
Firms use corporate-level diversification strategies for all the following reasons:
-value-creating -value-neutral -value-reducing
Which of the following characteristics would a sports organization benefit from if it acquired sports teams that it owned instead of setting up relationships with existing sports teams?
Quick access to new markets
Why was the proposed alliance between Lafarge and Holcim subject to regulatory approval in about 15 different jurisdictions?
Regulators in those jurisdictions were concerned that the combined LafargeHolcim would have too much market power.
When Disney adopts a corporate strategy in order to create synergy or achieve economies of scope, it is engaging in what type of diversification?
Related diversification
Complementary strategic alliances
are business-level alliances in which firms share some of their resources in complementary ways to create a competitive advantage.
Corporate-level core competencies
are complex sets of resources and capabilities that link different businesses, primarily through managerial and technological knowledge, experience, and expertise.
Economies of scope
are cost savings a firm creates by successfully sharing resources and capabilities or transferring one or more corporate level core competencies that were developed in one of its businesses to another of its businesses.
Financial economies
are cost savings realized through improved allocations of financial resources based on investments inside or outside the firm.
Multipoint competition
exists when two or more diversified firms simultaneously compete in the same product areas or geographical markets.
equity strategic alliance
is an alliance in which two or more firms own different percentages of the company they have formed by combining some of their resources to create a competitive advantage.
greenfield venture
is an entry mode through which a firm invests directly in another country or market by establishing a new wholly owned subsidiary.
global strategy
is an international strategy in which a firm's home office determines the strategies that business units are to use in each country or region.
multidomestic strategy
is an international strategy in which strategic and operating decisions are decentralized to the strategic business units in individual countries or regions for the purpose of allowing each unit the opportunity to tailor products to the local market.
transnational strategy
is an international strategy through which the firm seeks to achieve both global efficiency and local responsiveness.
Hypothetically, all of the following may have potentially limited the positive effects of the diversification associated with international strategies for FIFA EXCEPT:
many fans supported FIFA's actions.
In a merger:
two firms agree to integrate their operations on a relatively coequal basis
Firms use corporate-level diversification strategies for all the following reasons EXCEPT:
value-diversifying
Now that Comcast is still in the market to create a merger, which of the following companies would be the ideal candidate?
A small broadband service company with similar operations as Comcast
A(n) ____ occurs when one firm buys a controlling, or 100 percent interest, in another firm.
Acquisition
Disney can share activities across its different production firms, which allows it to learn faster and gain success by the knowledge sharing and efficiencies associated with each studio's expertise. What is a risk associate with this approach?
Activity sharing requires careful coordination among businesses in order to be successful.
Which factors of production might affect an organization such as FIFA when choosing new international locations?
Advanced infrastructure
What form of vertical integration is Starbucks using in purchasing La Boulange?
Backward vertical integration
Consider the graphic in your text that shows four quadrants for value-creating diversification strategies based on operational and corporate relatedness. Based on the information provided about Disney, in which quadrant of the chart does Disney bestfit?
Both operational and corporate relatedness
Which of the following activities should FIFA have completed to identify corruption before entering any new country?
Conducted a political risk analysis
Disney facilitates skill transfer among its different business units. This is a function of what type of relatedness?
Corporate
By purchasing La Boulange, Starbucks is implementing a ______________ in the hopes of gaining a competitive advantage.
Corporate-level strategy
Compared with downsizing, ____ has (have) a more positive effect on firm performance
Downscoping
Since the merger, LafargeHolcim has seen a rapid decline in its performance, so a new CEO was brought in. He immediately announced plans to focus on fewer markets, among other new directives. This is indicative of which form of restructuring?
Downscoping
Synergy
exists when the value created by business units working together exceeds the value that those same units create working independently.
Disney is able to realize cost savings by sharing resources or transferring core competencies across its businesses. This is known as what?
Economies of scope
It appears that an inability to realize economies of scale due to its large size is to blame for the newly formed LafargeHolcim's poor performance. In hindsight, which key attribute was missing in the integration process that has contributed to the company's decline?
Effective due diligence to ensure a good fit
One of Disney's resources is the use of fairy tale themes in the creation of new movies. If Disney chooses to continue with this strategy, why might Disney's ultimate ability to create value for the corporation from this resource be limited?
Fairy tales are not necessarily rare, difficult to imitate, or nonsubstitutable.
Which of the following was an incentive for FIFA to expand to other countries?
Gain access to consumers in emerging markets
Which of the following is a political risk faced by organizations such as FIFA that operate in multiple countries?
Potential nationalization of invested assets
Starbucks is implementing a corporate-level strategy to diversify its product offerings by purchasing La Boulange in an effort to:
Increase Starbucks' value to customers by improving its quality and overall performance in its industry
Which of the following benefits does a sports organization such as FIFA gain by successfully using international strategies?
Increased market size
Top-level executives at both Lafarge and Holcim predicted that integrating their operations would generate approximately $1.5 billion in annual cost savings. Which benefit of mergers and acquisitions did these executives hope to realize from their decision?
Increasing market power
Which of the following is NOT one of the benefits top-level executives at both Lafarge and Holcim hoped to realize through the integration of their operations?
Increasing market share in Europe
Prior to the two firms' integration, Holcim was known for its decentralized management while Lafarge was known for its centralized management. Analysts speculated that this could lead to which type of obstacle?
Integration difficulties
Top-level executives at both Lafarge and Holcim believed that a secondary benefit to integrating their operations would be the combination of Holcim's marketing prowess with Lafarge's innovation capabilities. This would be an example of which benefit of mergers and acquisitions?
Learning and developing new capabilities
Tomberlin Automotive has enjoyed which benefit of international strategy by manufacturing in China?
Location advantage
Comcast and Time Warner are both trying to build skills in retail marketing power and franchising to complement their abilities in content and distribution. Which best explains the diversification goals of both companies?
Market power (related diversification)
Comcast had been planning to purchase Time Warner for $45 million as a(n) _____________.
Merger
In July of 2015, Lafarge, a French buildings material provider, and Holcim, a materials and aggregates company founded in Switzerland, announced they would become LafargeHolcim. What type of strategy were the two firms using to unite into one firm?
Merger
Like Disney, Comcast also owns media outlets and movie studios, as does Time Warner. As they pursue corporate-level strategies, these firms need to be aware that they experience what type of competition, which probably pushes them to seek increased diversification?
Multipoint competition
How does Starbucks' current market power increase its chances for success in expanding its product offerings to include bakery items?
Starbucks is able to sell both its coffee and bakery products above its competitors' price point because it has a strong differentiation
As demonstrated by the attempted merger of Comcast and Timer Warner, what factor prevented the firms from receiving regulatory approval in a merger?
The anti-competitiveness that the merger would have created in the market
Why would Comcast's partnership with Time Warner be considered a merger instead of an acquisition?
The companies would have integrated their operations on a coequal basis
Which of the following is an advantage associated with greenfield ventures?
The level of control over the firm's operations
Why did the government and consumers have regulatory opposition to the proposed merger between Comcast and Time Warner?
The merger would result in Comcast and Time Warner providing more than half of all broadband services in the U.S.
Disney's corporate strategy is successful because of synergy. What does that mean?
The various businesses within Disney are able to create more value working together than the total of what each business could create on its own.
All of the following are international corporate-level strategies EXCEPT the ____ strategy.
Universal
What is the expected outcome of LafargeHolcim's new CEO's restructuring plan, which involves cutting costs, selling off assets, and focusing on fewer markets?
Through downscoping, he hopes to reduce costs, tighten strategic controls, and improve performance, but additional downsizing will result in a loss of human capital.
Which of the following is NOT an incentive for firms to become multinational?
To avoid high domestic taxation on corporate income
Although the merger between Comcast and Time Warner didn't go through, why might Comcast continue exploring merger options?
To bring its services to new locations
Why might sports organizations such as FIFA consider regionalization?
To group operations
What is a value-increase reason for Starbucks to diversify its product offerings to include bakery items?
To help Starbucks develop a more competitive position
During the integration process, LafargeHolcim faced three of the most common barriers to integration. Which of the following is NOT one of the obstacles it faced?
Too much diversification
Which of the following international corporate-level strategies does FIFA use?
Transnational strategy
A firm creates a competitive advantage when it develops and manages corporate-level cooperative strategies in a way that is valuable, rare, imperfectly imitable, and nonsubstitutable.
True
A horizontal acquisition involves two firms in the same industry.
True
Export, licensing, and the strategic alliance are all appropriate modes of entry into international markets.
True
Firms using the related constrained strategy share activities in order to create value.
True
By purchasing La Boulange and operating the bakery as Starbucks' sole supplier, Starbucks is able to control the value, quality, and costs associated with its products. These value chain efforts to increase profitability are called:
Vertical integration
Disney features characters and products in its movies. It is then able to cross-sell these products in its own media distribution outlets and at its parks and resorts. This is an example of what tool?
Vertical integration
When did FIFA begin its international diversification strategy?
When it was established
Corporate-level strategy is best described as:
actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets
A strategy in which firms work together to achieve a shared objective is a:
cooperative strategy
Corporate-level strategies are
detail actions taken to gain a competitive advantage through the selection and management of a mix of businesses competing in several industries or product markets.
A strategic alliance in which the partners own different percentages of the new company they have formed is called a(n):
equity strategic alliance
Vertical integration
exists when a company produces its own inputs (backward integration) or owns its own source of output distribution (forward integration).
Market power
exists when a firm is able to sell its products above the existing competitive level or to reduce the costs of its primary and support activities below the competitive level, or both.
When a competitor in the same industry is acquired, a firm has engaged in a
horizontal acquisition
Horizontal acquisitions
increase a firm's market power by exploiting cost-based and revenue-based synergies.
strategic alliance
is a cooperative strategy in which firms combine some of their resources to create a competitive advantage.
single business
is a firm where more than 95 percent of its revenues are generated by the dominant business. Firms such as the Wrigley Co. are examples of single-business firms. Wrigley Co. has dominated the global gum-related industry as the largest manufacturer of chewing gum, specialty gums, and gum bases.
cooperative strategy
is a means by which firms collaborate to achieve a shared objective.
takeover
is a special type of acquisition where the target firm does not solicit the acquiring firm's bid; thus, takeovers are unfriendly acquisitions.
joint venture
is a strategic alliance in which two or more firms create a legally independent company to share some of their resources to create a competitive advantage.
Franchising
is a strategy in which a firm (the franchisor) uses a franchise as a contractual relationship to describe and control the sharing of its resources with its partners (the franchisees).
synergistic strategic alliance
is a strategy in which firms share some of their resources to create economies of scope.
diversifying strategic alliance
is a strategy in which firms share some of their resources to engage in product and/or geographic diversification.
cross-border strategic alliance
is a strategy in which firms with headquarters in different countries decide to combine some of their resources to create a competitive advantage.
Restructuring
is a strategy through which a firm changes its set of businesses or its financial structure.
corporate-level cooperative strategy
is a strategy through which a firm collaborates with one or more companies to expand its operations.
international diversification strategy
is a strategy through which a firm expands the sales of its goods or services across the borders of global regions and countries into a potentially large number of geographic locations or markets.
business-level cooperative strategy
is a strategy through which firms combine some of their resources to create a competitive advantage by competing in one or more product markets.
acquisition
is a strategy through which one firm buys a controlling, or 100 percent, interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio.
international strategy
is a strategy through which the firm sells its goods or services outside its domestic market.
merger
is a strategy through which two firms agree to integrate their operations on a relatively coequal basis.
network cooperative strategy
is a strategy where several firms agree to form multiple partnerships to achieve shared objectives.
nonequity strategic alliance
is an alliance in which two or more firms develop a contractual relationship to share some of their resources to create a competitive
The lowest level of diversification is the ____ level.
single-business
corporate-level strategy
specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.
International strategy refers to a(n):
strategy through which the firm sells products in markets outside the firm's domestic market
A ____________ is a strategy in which firms share some of their resources and capabilities to create economies of scope and is similar to the business-level horizontal complementary alliance.
synergistic strategic alliance
All of the following are business-level cooperative strategic alliances EXCEPT:
synergistic strategic alliances
Synergy exists when:
the value created by business units working together exceeds the value the units create when working independently
Currently, the rationale for making an acquisition includes each of the following EXCEPT:
to decrease taxes paid by shareholders
