Chapter 5 (Test 2), Strategic Management Test 2
Research shows that about ____ percent of mergers and acquisitions are successful.
20
___________ is often used when the acquiring firm paid too high a premium to acquire the target firm.
Downsizing
Which of the following is an example of a strategic action?
Entry into the European market by Home Depot
____ markets are often described as volatile and innovative.
Fast-cycle
____ typically result(s) in the acquiring firm being able to prevent valuable human resources in the acquired firm from leaving.
Friendly acquisitions
_________ is the set of costs associated with unfamiliar operating environments; economic, administrative and cultural differences; and the challenges of coordination over distances.
Liability of foreignness
Which type of diversification is most likely to create value through financial economies?
Unrelated
Which organization has the highest market dependence?
a company that specializes in making replacement tiles for the space shuttle
If conflict in a strategic alliance or joint venture is not manageable, a(n) _______may be a better option.
acquisition
In Porter's model, if a country has both ________ and __________ production factors, it is likely to serve an industry well by spawning strong home-country competitors that can also be successful global competitors.
advanced; specialized
Rapid-Built Homes specializes in low-cost prefabricated, modular homes that can be erected in a matter of days anywhere in the country. Rapid-Built focuses on entire subdivisions of homes developed by real estate speculators. ModernModular Homes (ModMod) specializes in modular homes designed by architects, which can be built anywhere in the country. The buyers usually build the home themselves from kits on their own lots. ModMod sells fewer than 100 house kits per year. ModMod is run by two professors of architecture as a sideline business. According to the "Framework of Competitive Analysis," we can say that Rapid-Built and ModMod
are probably not engaged in intense competitive rivalry.
A second mover
attempts to provide a product with greater customer value than the first mover's product.
Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare and only two brick plants in the United States make this type of brick. Specialty Steel has decided to buy one of these brick plants. This is an example of
backward integration.
The CEO of the Wholesome Food retail grocery chain, which specializes in organic and natural produce and meat, has stated, "The key to success is to find your niche and focus on it, regardless of what anyone else does." The CEO
believes he has placed his firm in a slow-cycle industry where concerns about protecting unique competencies dominate concerns about market share.
When a firm is overly dependent on one or more products or markets, and the intensity of rivalry in that market is intense, the firm may wish to ____ by making an acquisition.
broaden its competitive scope
large or extraordinary debt.
carrying a high risk of failure.
Multimarket competition occurs when firms
compete against each other in several geographic or product markets.
Arkadelphia Polymers, Inc., earns 60 percent of its revenue from exports to Europe and Asia. The CEO of the company would be
concerned if the value of the dollar strengthened.
The more sharing of resources and activities among businesses, the more ____ is the relatedness of the diversification.
constrained
The value of the assets of a firm using a diversification strategy to create both operational and corporate relatedness tend to be
discounted by investors.
A global corporate-level strategy emphasizes
economies of scale.
Firms that have selected a related diversification corporate-level strategy seek to exploit
economies of scope between business units.
The location advantages associated with locating facilities in other countries can include all of the following EXCEPT
evasion of host country governmental regulations.
A U.S. manufacturer of adaptive devices for persons with disabilities is considering expanding internationally. It is a fairly small company, but it is looking for growth opportunities. This company should primarily consider the option of
exporting.
A friendly acquisition
facilitates the integration of the acquired and acquiring firms.
A company in a ____ industry is LEAST likely to make heavy use of patents and copyright
fast-cycle
The benefits of expanding into international markets include each of the following opportunities EXCEPT
favorable tax concessions and economic incentives by home-country governments.
The problems associated with exporting include
high transportation costs and the expense of tariffs.
Under industry structural analysis (Chapter 2), ____ rivalry is viewed as detrimental to profitability. Under the model of national advantage (Chapter 8), ____ rivalry is viewed as ____ as it results in competition and surviving firms are able to compete against global rivals.
high; high; beneficial
Which of the following is NOT a limitation directly relating to vertical integration?
imitation of core technology by potential competitors
A company pursuing vertical integration can gain market power over its competitors through all of the following EXCEPT
improved adjustment to technological changes.
Which of the following is NOT a typical disadvantage of licensing?
incompatibility of the licensing partners
Managerial motives to seek diversification include a desire to
increase their compensation.
Entering new markets through acquisitions of companies with new products is not risk-free, especially if acquisition becomes a substitute for
innovation.
The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because
it is difficult and time intensive for companies to develop products that differ from their current product line.
When a firm simultaneously practices operational relatedness and corporate relatedness,
it is difficult for investors to observe the value created by the firm.
Caterpillar's payment of a 32 percent premium for the acquisition of Bucyrus in 2011 and subsequent need to issue more stock illustrates the acquisition problem of
large or extraordinary debt.
The Mars acquisition of the Wrigley assets was part of its related constrained diversification and added market share to the Mars/Wrigley integrated firm. It allowed Mars to gain _______because it could sell its products above the market level or reduce its costs below the market level.
market power
Compared with diversification based on intangible resources, diversification based on financial resources is
more imitable and less likely to create value on a long-term basis.
There are few true mergers because
one firm usually dominates in terms of market share, size, or value of assets.
Goods or services in standard-cycle markets reflect
organizations that serve a mass market.
Cross-border acquisitions are primarily made to
overcome barriers to entry in another country.
The ____ phase is probably the single most important determinant of shareholder value creation in mergers and acquisitions.
post-acquisition integration
Walt Disney's focus on ____ is typical of a slow-cycle market.
proprietary rights
In order to compete effectively, standard-cycle firms need all of the following EXCEPT
rapid and continuous product introductions.
Which of the following is NOT one of the three main restructuring strategies?
realigning
The _________________diversification strategy creates value in two ways. First, since the core competence has already been developed in one business, the firm does not have to allocate resources to develop it. Second, since the resource is intangible, competitors cannot easily imitate it.
related linked
Although a(n) ________________ firm, GE (discussed in the Chapter 6 Opening Case) has done an exceptional job of _____________________ its four major strategic business units.
related linked; allocating capital across
Because Coca-Cola, Nestle, and PepsiCo all sell a product (bottled water) that is essentially the same and all three giant companies are engaged in battles for market share using incremental changes in their products and seeking loyalty to brand names, it is most likely that the bottled water market is a(n)
standard-cycle market.
Competition between candy makers (e.g., Hershey, Mars, Cadbury, Nestle, and Godiva) where firms package design (including package downsizing) and ease of availability is characteristic of a(n)
standard-cycle market.
Consumer goods producers are innovating in terms of healthy products. This type of incremental innovation is typical of
standard-cycle markets.
The flat-panel television market where prices have come down and competition has become more stable is best characterized as
standard-cycle.
International strategy refers to a(n)
strategy through which the firm sells products in markets outside the firm's domestic market.
A multidomestic corporate-level strategy is one in which
the firm customizes the product for each country in which it competes.
One of the primary reasons for failure of cross-border strategic alliances is
the incompatibility of the partners.
All of the following statements are correct EXCEPT
the majority of acquisitions increase long-term value for the acquiring firm.
Effectively implementing the ________ international corporate-level strategy often produces higher performance than does implementing either the _______ or _________ strategies.
transnational; multidomestic; global
All of the following are international corporate-level strategies EXCEPT the ____ strategy.
universal
Hutchison Whampoa Limited (HWL) has businesses in ports and related services, telecommunications, property and hotels, retail and manufacturing, and energy and infrastructure. HWL makes no efforts to share activities or transfer core competencies among the businesses. HWL is following a strategy of__________diversification.
unrelated
One problem with becoming too large is that large firms
usually increase bureaucratic controls.
PorkPride Foods produces hams and other meat products. It owns hog raising operations. This is an example of a ____ business.
vertically integrated
