BUSI 400: Chapter 6

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

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

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

Core competencies

Which of the following are true about cost savings from sharing activities? (Check all that apply.)

Cost savings from sharing activities may come from many sources, including eliminating jobs and facilities. It is the most common type of synergy and easiest to estimate.

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

ability to cope with change confidence clearheadedness

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

backward

When management supports acquisition integration by making necessary structural changes, adding the required elements, and gives the integration the required time, this is called ___________ the transformation.

catalyzing

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

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

enabling managers to focus on the firm's core businesses raising cash to help fund existing businesses providing the firm with more resources to spend on attractive alternatives

The Delicioso cookie company in Mexico has long wanted to sell its products outside of its home country. Its managers created a strategic alliance with a chain of coffee shops in southern Africa wherein the coffee shops would promote Delicioso cookies in exchange for deep discounts. What advantage has Delicioso gained through this alliance?

expanding into new markets

One way to increase negotiating power with suppliers is ______.

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

A(n) ______ is a prearranged contract with managers specifying that, in the event of a hostile takeover, the target firm's managers will be paid a significant severance package.

golden parachute

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

poison pill golden parachute greenmail

Parenting advantage is the ______.

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

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

strategic alliance

Which of the following are the two types of market power?

vertical integration pooled negotiating power

______ 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.

Which of the following are among the Boston Consulting Group's requirements for a business to divest successfully? (Choose all that apply.)

Carefully valuate the business being sold. Time the move correctly. Practice good communication.

Which statement is true about dealing with potential buyers during divestiture?

Develop a narrative to convince each buyer of the benefit to them.

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

Divestment

______ is a payment by a firm to a hostile party for the firm's stock at a premium, made when the firm's management feels that the hostile party is about to make a tender offer.

Greenmail

______ 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

Which of the following are among the four actions that McKinsey suggested management should take to promote successful acquisition integration? (Choose all that apply.)

Institutionalize new behaviors and ways of operating. Commit full management effort to the change. Protect the base business.

______ 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 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

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

______ 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 criteria that a core competency must meet in order to create value for a corporation? (Check all that apply.)

The core competencies must be difficult for competitors to imitate or find substitutes. The core competency must enhance competitive advantage(s) by creating superior customer value. The core competency must have a part in at least one way in which a corporation's different businesses are similar.

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.

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

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

Which of the following are motives for and benefits of using mergers and acquisitions as a strategy? (Check all that apply.)

They are faster than building internal resources from scratch. They provide the opportunity to attain synergy by leveraging core competencies, sharing activities, and building market power. They help obtain valuable resources that can help expand product and service offerings. They provide a means for companies to enter new market segments.

______ is a perspective where every market transaction involves specific costs.

Transaction cost

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

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. Firms often develop new products or services at relatively lower costs.

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

Vertical integration

To help create value and build synergy among the businesses of a corporation, the corporation's ____________ competences must be difficult for competitors to find substitutes for or to imitate.

core

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

cost savings revenue enhancements

Which of the following are transaction-related costs, according to the transaction cost perspective? (Check all that apply.)

costs associated with negotiating terms costs associated with creating the contract costs associated with monitoring and enforcing the terms of the contract costs due to the searching for and purchase of inputs from an outside source

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

create the greatest value for shareholders

Which of the following are advantages of cooperative business relationships? (Choose all that apply.)

development of new technologies reduced value chain costs access to new markets

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

dog question mark cash cow

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 strategic alliances or joint ventures mergers and acquisitions

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 examples of the risks of vertical integration? (Check all that apply.)

problems associated with unbalanced capacities along the value chain additional administrative costs associated with managing a more complex set of activities loss of flexibility resulting from large investments

Which of the following are benefits of vertical integration? (Check all that apply.)

proprietary access to new technologies protection and control over valuable assets simplified procurement and administrative procedures a secured supply of raw materials or distribution channels

In addition to preventing a hostile takeover, greenmail ______.

protects the jobs of the target firm's management

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

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

One way of achieving cost savings by sharing activities among business units is to apply economies of _______________ in purchasing.

scale

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

sharing activities

Mergers and acquisitions have been especially popular in high-technology and knowledge-based industries, because ______. (Check all that apply.)

they help companies to get to market very quickly they help companies become viable the industry operates in a highly dynamic environment where changes in the market and technology occur very quickly and unpredictably

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

to create shareholder value

The main purpose of a golden parachute is to protect ______.

top managers' income if they lose their jobs due to a hostile takeover