MGMT: Chapter 8

Which of the following are strategic options for increasing a corporation's overall success?

(1) broadening the scope of diversification by entering additional industries (2) sticking closely with the existing business lineup and pursuing opportunities presented by these businesses (3) retrenching to a narrower scope of diversification by divesting poorly performing businesses

Businesses with strategic fit in supply chain activities are able to perform better together by

(1) cooperating with common supply chain partners. (2) sharing logistical resources. (3) obtaining volume discounts on incoming components.

Restructuring a business

(1) generally involves liquidating underutilized assets. (2) often entails transferring experienced managers to the newly acquired business. (3) usually occurs when a diversified company acquires a new business that is underperforming.

The portfolio approach to financial fit revolves around the fact that

cash flow and investment characteristics vary among businesses.

In calculating industry attractiveness scores

competition intensity should be heavily weighted.

Factors that can be used to quantify the competitive strengths of a diversified company's business subsidiaries include

costs relative to competitors' costs. ability to match or beat rivals on key product attributes. relative market share.

Quantitative industry-attractiveness scores can be calculated based on

emerging threats and opportunities. market size and projected growth rate. the presence of cross-industry strategic fit.

In answering the question of comparative costs, acquisition transaction costs include which of the following?

evaluating potential targets negotiating a price identifying potential targets

Cross-business strategic fit can exist

in customer service activities. in supply chain activities. at various points along the value chain.

Unrelated diversification

provides very general, low-value resources for the subsidiaries. provides a limited potential for competitive advantage. rarely performs better than the sum of what the individual business units could achieve independently.

Corporate parents effectively contribute to the success of their businesses by

providing general resources that lower their operating costs. utilizing popular umbrella brands.

After a evaluating the strength, attractiveness, and fit of a diversified company's strategy, the next move is to

rank the performance potential of the businesses.

Diversified companies that are able to create more value in their businesses than other diversified companies have what is called

a parenting advantage.

Strategic analysis of diversified companies

builds on the same ideas and techniques used for analyzing single-business companies.

The crafting of strategic moves to improve a diversified company's overall performance

can be placed into four broad categories of action.

Unrelated diversification strategy

can create only a small amount of competitive advantage beyond that which can be created by the individual businesses acting alone.

For which of the following conditions is restructuring a diversified company's business lineup an attractive course of action?

when the company has too many businesses in slowly growing or declining industries when the market shares of one or more major business units are decreasing because of superior competition when the interest owed on large debts is greatly reducing profitability

The broad categories of action for crafting strategic moves to improve a diversified company's overall performance include

widening the company's business scope by making new acquisitions in new industries. divesting certain businesses and retrenching to a narrower base of business operations. sticking closely with the existing business lineup and pursuing opportunities that those businesses present.

Which of the following are true in using cross-business strategic fit to create gains in profitability and shareholder value?

(1) It builds shareholder value in ways that are not possible through stock ownership in a variety of industries. (2) The more a company's businesses are related, the greater the company's opportunity to turn strategic fit into competitive advantage. (3) Cross-business strategic fit benefits are possible only through a strategy of related diversification.

Which of the following statements are true about a successful diversification effort?

(1) It must give shareholders value that they cannot get by purchasing different stocks on their own. (2) It must add long-term economic value for shareholders.

Which of the following statements are true of unrelated diversification?

(1) Most management teams are not capable of effectively managing a diversified group of unrelated businesses. (2) A very small number of unanticipated problems or mistakes can have a major negative effect on corporate earnings. (3) Problems can occur when corporate management makes decisions for businesses they do not know well.

Which of the following statements are true concerning the cross-business allocation of financial resources by parent companies?

(1) There is increased opportunity to add shareholder value because managers are privy to internal information unavailable to external financiers. (2) Parent companies can deliver funds that would otherwise be unavailable owing to poor market conditions. (3) Cross-business allocation can be especially advantageous during times of financial market crises.

What questions can be answered by determining the competitive value of strategic fit in diversified companies?

(1) Will leveraging a potent umbrella brand or corporate image strengthen the businesses and increase sales? (2) Are the cost savings associated with economies of scope likely to give one or more businesses a cost-based advantage? (3) How much competitive value will come from the cross-business transfer of skills, technology, or intellectual capital?

Which of the following statements are true of economies of scope?

They are a distinct concept from economies of scale. They are available only to firms engaging in related diversification. They result from strategic fit among related businesses, allowing the sharing of resources among diversified businesses.

The redistribution of excess cash flow by parent companies from some businesses to others

is especially important when credit is tight.

Examples of strategic fit in manufacturing include

the consolidation of production into a smaller number of plants. the sharing of cost-efficient production methods. the transfer of expertise in quality control.

It makes sense to stick closely with a diversified company's present business lineup when

the current lineup reliably creates economic value for shareholders. the existing business lineup provides ample opportunity for growth. the company's existing businesses match the company's diversification strategy.