Ch. 8 Quiz

PepsiCo divested its group of fast-food restaurant businesses(KFC, Pizza Hut, and Taco Bell) to Yum! Brands in order to allow PepsiCo to focus on its core soft drink and snack-food businesses. A useful guide to determine whether or when to divest a business subsidiary is to ask,

"If we were not in this business today, would we want to get into it now?"

You are the general manager of a regional HR staffing company. What strategic consideration would be LEAST likely to influence your decision to diversify your firm into new, related or unrelated business services?

analyzing and settling on the appropriate value chain for each business the company has entered.

Checking a diversified company's business portfolio for the competitive advantage potential of cross-business strategic fits does not involve ascertaining the extent to which sister business units

are cash cows and which ones are cash hogs.

Of the following strategic fit opportunities, which choice is not supportive of related business activities?

overhauling and streamlining the operations of the business by refocusing value chain activities towards businesses that can provide a superior job of parenting

In April 2017, PetSmart agreed to make the largest e-commerce acquisition in history to date, putting a deal in place to snatch up fast-growing pet food and product site Chewy.com for $3.35 billion. The acquisition premium for this particular deal can be calculated as the amount by which the price PetSmart offered for Chewy.com exceeded the

preacquisition market value of Chewy.com

When pharmacy chain CVS Health announced a $69 billion merger with the health insurance giant Aetna late is 2017, top management of CVS needed to weigh a number of strategic consideration except

CVS's opportunities to pursue debt reduction to lower its debt/equity ratio while maintaining asset levels.

Unrelated businesses

Have dissimilar value chains and resource requirements, with no competitively important cross-business relationships at the value chain level.

Conditions that may make corporate restructuring strategies appealing include all of the following EXCEPT

a business lineup that consists of too many cash cow businesses.

The three tests for judging whether a particular diversification move can create value for shareholders are

attractiveness test, the cost of entry test, and the better-off test.

The nine-cell attractiveness-strength matrix provides clear, strong logic for considering using

both industry attractiveness and business strength in allocating resources and investment capital to its different businesses.

The option for allocating a diversified company's financial resources include all of the following EXCEPT

decreasing dividend payments and/or selling shares of stock

One strategic fit-based approach to related diversification would be to

diversify into new industries that present opportunities to transfer specialized expertise, technological know-how, or other valuable resources and capabilities from one business's value chain to another's.

Strategies to restructure a diversified company's business lineup involves

divesting low-performing businesses that do not fit and acquiring new ones where opportunities are more promising to put a new face on the company's business makeup.

The businesses in a diversified company's lineup exhibit good resource fit when

individual businesses have matching resource requirements at points along their value chain and add to a company's overall resource strengths and when solid parenting capabilities exists without spreading itself too thin.

An umbrella brand

is a generalized resource that can be leveraged in unrelated diversification.

For an unrelated diversification strategy to produce financial results above that of stand-alone entities, executives must do all of the following EXCEPT:

leverage the cross-business strategic fit advantage effectively.

Management's ranking of business units and establishing a priority for resource allocation should

put business units with the brightest profit and growth prospects and resource fits at the top of the investment priority list.

What is the difference between economies of scale and economies of scope?

scale refers to cost savings that accrue directly from larger-sized operations, while scope stems directly from strategic fit along the value chains of related business.

The two biggest drawbacks or disadvantages of unrelated diversification are

the difficulties of competently managing many different businesses and being without the added source of competitive advantage that cross-business strategic fit provides.

A weighted industry attractiveness assessment is generally analytically superior to an unweighted assessment because

the various measures of attractiveness are not likely to be equally important in determining overall attractiveness.