SEVI 3013 Chapter 6

______ is an expansion or extension of the firm by integrating preceding or successive production processes.

Vertical integration

When managers attempt to shape a firm's strategy to serve their selfish interests rather than maximizing long-term shareholder value, they are guilty of ______.

egotism

The process of firms expanding their operations by entering new businesses is called ______.

diversification

______ are managers' actions to avoid losing wealth or power as a result of a hostile takeover.

Antitakeover tactics

Which of the following is one of the best-known portfolio management frameworks?

Boston Consulting Group's growth/share matrix

Which of the following statements about growth for growth's sake are correct?

CEOs often have huge incentives for increasing the size of their firm. CEOs are especially driven to pursue acquisitions. Many high-tech firms have suffered from the negative impact of uncontrolled growth.

______ refers to a firm's strategic resources that reflect the collective learning in the organization.

Core competencies

______ is the exit of a business from a company's portfolio.

Divestment

Which of the following are true about engaging in internal development? (Check all that apply.)

Firms often develop new products or services at relatively lower costs. Value is created by the company internally, thus it does not have to share the wealth with alliance partners. Difficulties with combining companies' value-chain activities and merging cultures are not an issue.

______ is/are a result of managers' actions to grow the size of their firms not to increase long-term profitability but to serve managerial self-interest.

Growth for growth's sake

A firm's core competencies include which of the following? (Check all that apply.)

Integrating multiple streams of technologies Marketing diverse products and services Coordinating diverse production skills

______ is entering a new business through investment in new facilities. It is often called corporate entrepreneurship and new venture development.

Internal development

Which of the following are objectives that divesting a business can accomplish for the parent? (Check all that apply.)

It enables managers to focus on the firm's core businesses. It raises cash to help fund existing businesses. It provides the firm with more resources to spend on attractive alternatives.

Which of the following is an example of how managerial motives can erode value creation?

Managers who act in their own self-interest.

______ refers to firms' abilities to profit through restricting or controlling supply to a market or coordinating with other firms to reduce investment.

Market power

______ is the improvement in bargaining position relative to suppliers and customers.

Pooled negotiating power

Which of the following statements regarding unrelated diversification are correct? (Check all that apply.)

Potential benefits are derived from vertical (hierarchical) relationships. Synergy is created through business units' interactions with the corporate office. The corporate office enhances value by establishing human resource practices and financial controls for each business unit.

______ is when a firm enters a different business in which it can benefit from leveraging core competencies, sharing activities, or building market power.

Related diversification

Which of the following statements about shareholders and managers are true? (Check all that apply.)

Shareholders expect managers to be rational beings. Shareholders expect managers to act in the best interest of shareholders. Shareholders expect managers to maximize long-term shareholder value.

______ is when value-chain activities of two or more businesses are performed by only one of the businesses.

Sharing activities

Which of the following are ways that synergy is created through the use of unrelated diversification? (Check all that apply.)

The corporate office contributes through parenting. The corporate office adds value by allocating resources throughout the entire corporation to optimize corporate profitability goals. The parent company restructures the acquired business.

When a company incorporates more processes toward the original source of raw materials, it is called ______ integration.

backward

Which of the following are quadrants in the Boston Consulting Group's portfolio matrix? (Check all that apply.)

cash cow question mark dog

Which of the following are traits of a healthy ego? (Check all that apply.)

confidence ability to cope with change clearheadedness

The primary goal in selecting the best means of diversification should be which vehicle will ______.

create the greatest value for shareholders

One way to increase negotiating power with suppliers is ______.

for similar business units to work together and pool their raw material procurement

Which of the following are antitakeover tactics that managers use? (Check all that apply.)

golden parachute poison pill greenmail

Companies that implement a related diversification strategy may benefit from which of the following? (Check all that apply.)

horizontal relationships across different businesses in the diversified corporation economies of scope leveraging core competencies and sharing activities

Which of the following are ways a firm can achieve the benefits of diversification? (Check all that apply.)

internal development mergers and acquisitions strategic alliances or joint ventures

A(n) _____ is when two or more firms contribute equity to form a new legal entity.

joint venture

While sharing activities may decrease costs, increase revenues, and enhance product differentiation, it sometimes can have an unintended negative effect, such as ______.

lowered perceptions of the product's quality and prestige

Which of the following are the two types of market power? (Check all that apply.)

pooled negotiating power vertical integration

Parenting advantage is the ______.

positive contributions of the corporate office to a new business as a result of the expertise and support provided

Which of the following are ways that parent companies create value through their management expertise? (Check all that apply.)

providing consulting on business units' acquisitions, divestitures, and new internal development decisions improving plans and budgets providing central functions such as human resource management and procurement

Sharing activities can potentially provide which of the following two payoffs? (Check all that apply.)

revenue enhancements cost savings

Firms pursuing differentiation strategies might engage in ______, such as using a shared order-processing system.

sharing activities

A(n) ______ is a cooperative relationship between two or more firms.

strategic alliance

What should senior management's primary motivation be for implementing a diversification strategy?

to create shareholder value