Senior Sem Ch.8

Which of the following are among the four questions that need to be asked when determining how best to enter a new business? (Choose every correct answer.)

- Are there entry barriers to overcome? - Is speed an important factor in the firm's chances for successful entry? - Which is the least costly mode of entry, given the company's objectives?

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

- Broadening the scope of diversification by entering additional industries - Retrenching to a narrower scope of diversification by divesting poorly performing businesses - Sticking closely with the existing business lineup and pursuing opportunities presented by these businesses

Which are factors that can be used to quantify the competitive strengths of a diversified company's business subsidiaries?

- Costs relative to competitors' costs - Ability to match or beat rivals on key product attributes - Relative market share

Steps involved in assessing the positive and negative aspects of a diversified company's strategy and determining how to improve performance include which of the following?

- Evaluating the individual and group attractiveness of the industries the company has diversified into - Determining if the firm's resources fit the requirements of its current business lineup - Determining the competitive strength of the company's business units

Which are examples of opportunities for strategic fit?

- Exploiting the common use of a well-known brand name - Sharing costs between businesses by combining their related value chain activities into a single operation - Transferring specialized expertise from the value chain of one business to another

Which of the following are questions to ask when evaluating industry attractiveness?

- How appealing is the whole group of industries in which the company has invested? - Does each industry the company has diversified into represent a good market for the company to be in? - Which of the company's industries are most attractive?

Which of the following are true of the nine-cell attractiveness-strength matrix?

- It identifies the business strength of businesses. - It identifies the industry attractiveness of businesses. - It helps diversified companies allocate resources among their businesses.

Which of the following statements are true of unrelated diversification?

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

Which of the following statements are true of multibusiness diversification strategies? (Choose every correct answer.)

- Some companies are narrowly diversified around two to five related or unrelated businesses. - Some multibusiness enterprises are diversified into unrelated areas but have a group of related businesses within each area. - Combination related-unrelated diversification strategies are attractive to companies with a mix of valuable competitive assets.

Internal development of a new business is a good idea when which of the following conditions are met?

- The parent company has the in-house resources needed to launch the company. - There is plenty of time to start the business. - It is cheaper to enter internally than through an acquisition.

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

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

In an unrelated diversification strategy, managers must make sure acquisition candidates have which of the following characteristics?

- They meet corporate targets for profitability and return on investment. - They are big enough to significantly contribute to the parent company's bottom line. - They are in an industry with attractive growth potential.

Entering a new business via a joint venture can be useful in which of the following situations?

- When an opportunity is too complicated or risky for one company to attempt alone - When an opportunity in a new industry requires more know-how than one company has alone - When diversification entails operations in a foreign country

Which of the following allow businesses with strategic fit in supply chain activities perform better together?

- obtaining volume discounts on incoming components - cooperating with common supply chain partners - sharing logistical resources

Which of the following would be misguided reasons for pursuing unrelated diversification?

- risk reduction - reducing earnings volatility - boosting managerial compensation

Which of the following are true statements concerning related businesses?

- they have compatible value chain activities - they can be combined to perform better than the sum of the individual businesses - they have similar resources and capabilities

In order to pass the three tests of corporate advantage, what must executives do?

1. diversify into industries where the businesses can produce consistently good earning and return on investment 2. do a superior job of corporate parenting via high-level managerial oversight 3. negotiate favorable acquisition prices

A good resource fit would include solid parenting capabilities in companies that pursue which of the following?

An unrelated diversification strategy

__________ could potentially be achieved through cost reductions stemming from strategic fit along the value chains of ITT's businesses.

Economies of scope

Which statement is true concerning strategic fit?

It allows cross-business sharing of resources that enable value chain activities.

Which statement is true concerning the pursuit of growth through unrelated diversification?

It can be misguided if the growth is not profitable growth.

Which of the following are steps in creating a diversified company's corporate strategy?

Picking new industries to enter and the means for entering them Initiating actions to boost the combined performance of the company's collection of businesses Leveraging cross-business value chain relationships into competitive advantage

Which of the following is true about joint ventures?

They are usually short-lived, ending as soon as the partners decide to part ways.

Which of the following is true of economies of scope?

They come directly from strategic fit along the value chains of related businesses.

Corporate Strategy helps managers understand which strategy question?

Where should the firm compete?

A diversified company in which one core business accounts for 50% to 80% of total revenues and other businesses account for the remainder is known as ______.

a dominant-business enterprise

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

a parenting advantage.

The means of entering a new business by buying an existing business is referred to as ______.

acquisition

Which of the following are the ways a company can enter a new business?

acquisition, internal startup, and joint ventures

The decision to diversify should begin with ______.

an economic justification

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

ITT's portfolio of business units reflects a strategy of

combination of related and unrelated diversification.

Choosing how best to enter a new business:

depends partially on determining the least costly mode of entry.

Disney's expansion from short films to animated films to live action films to television is an example of

expansion into new markets by leveraging a core capability.

Which of the following are drawbacks of acquisition?

integration of the company into the existing firm can be time consuming, there can often be excessive premiums, and there can be high integration costs

A diversified company can add value by shifting capital from business units generating free cash flow to those needing capital to grow by having a strong ______.

internal capital market

If the question of critical resources and capabilities demonstrates that a company has or can easily lease all of the materials necessary to start a new business, it will probably do so by

internal development

Determining the competitive value of strategic fit in diversified companies ______.

is important in evaluating their related diversification strategies

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

it must add long-term economic value for shareholders and it must give shareholders value that they cannot get by purchasing different stocks on their own

According to ITT's website, the company began as a telephone and telegraph company; in the 1960s and 1970s it acquired businesses such as Sheraton Hotels, Avis Rent-a-Car, Hartford Insurance, and Continental Baking (the makers of Wonder Bread). These acquisitions, which were later divested, reflected a strategy of

mostly unrelated diversification.

Which of the following are terms that refer to diversification by starting a new business subsidiary from scratch?

new venture development, corporate venturing, and internal development

Companies practicing unrelated diversification overwhelmingly enter new businesses by ______.

obtaining an established company

Disney's ability to leverage its characters across its network of theme parks, media networks and movies, and consumer products is an example of a corporate

parenting advantage.

In order to be a good market for a company to be in, an industry should ______.

pass the industry attractiveness test

Which of the following would not generate a strategic fit among ITT's business units?

provide low-level oversight and make available minimal corporate resources

Corporate parents effectively contribute to the success of their businesses by

providing general resources that lower their operating costs and utilizing umbrella brands

When a firm with a related diversification strategy has businesses that match specialized resource requirements at points along their value chains that are critical for the business's market success, they are said to have

resource fit.

Diversifying into new industries

should be explored when a single-business company encounters dwindling opportunities in its principal business.

Unrelated diversification strategies

tend to have more overall failures than successes.

Businesses are said to be related when ______.

their value chains exhibit competitively important cross-business commonalities

Corporate brands that do not have a connotation of any specific type of product are known as

umbrella brands

Diversification is not really viewed as a success unless it _____.

yields added long-term economic value for shareholders