CHAPTER 5,7
Entering new markets through acquisitions of companies with new products is not risk-free, especially if acquisition becomes a substitute for a. market discipline. b. innovation. c. risk analysis. d. international diversification.
b
How does financial slack contribute to the success of acquisitions? a. It facilitates the selection and evaluation of target firms. b. It enables companies to maintain a low level of debt after the acquisition. c. It promotes innovation investments in R&D activities. d. It helps establish friendly relationships between acquiring and acquired firms.
b
IBM implemented a strategy, which included layoffs of thousands of employees and the consolidation of its business units. The company aimed to reduce its workforce and eliminate underperforming or redundant divisions to focus on its core businesses and enhance profitability. Which type of restructuring strategy involves a reduction in the number of a firm's employees and operating units? a. Downscoping b. Leveraged buyouts c. Complete sell-off d. Downsizing
d
In 2010, Air Products made a hostile bid to acquire Airgas, a leading supplier of industrial gases and equipment. Airgas rejected multiple acquisition offers from Air Products, arguing that they undervalued the company. What term is used to describe an acquisition where the target firm does not solicit the acquiring firm's bid? a. Merger b. Friendly acquisition c. Hostile acquisition d. Takeover
d
Manny Inc. recently completed the purchase of its primary supplier. Manny intends to begin expanding the market to which the supplier's products are sold. This purchase is a(n) a. merger. b. unrelated acquisition. c. horizontal acquisition. d. vertical acquisition.
d
One problem with becoming too large is that large firms a. tend to have less market power. b. have less potential for economies of scale. c. become attractive takeover targets. d. usually increase bureaucratic controls.
d
What type of buyout is most likely to lead to greater entrepreneurial activity and growth? a. Management buyout b. Employee buyout c. Related buyout d. Whole-firm buyout
a
Which pair of firms has the LEAST resource similarity? a. Small, family-owned Italian restaurant; Olive Garden b. Target; Walmart c. HP; Dell d. FedEx; UPS
a
Pappelbon Enterprises recently acquired a chain of convenience stores offering both fuel and food. Pappelbon is now surprised and dismayed to find that the gas pumps have been poorly maintained and will need to be replaced at considerable expense. All of the following statements accurately reflect this EXCEPT: a. Pappelbon did not fully evaluate the target. b. Pappelbon overpaid. c. Pappelbon's due diligence was not fully effective. d. Pappelbon's management was overly focused on acquisitions.
d
Problems associated with acquisitions include all of the following EXCEPT: a. managers overly focused on acquisitions. b. integration difficulties. c. large or extraordinary debt. d. excessive time spent on the due diligence process.
d
Whole-firm LBOs tend to result in all the following negative outcomes EXCEPT: a. large debt and increased financial risk. b. failure to invest in R&D. c. risk-averse management. d. inefficient operations.
d
Due diligence includes all of the following activities EXCEPT assessing a. differences in firm cultures. b. tax consequences of the acquisition. c. the level of private synergy between the two firms. d. financing for the intended transaction.
c
Evaluate the significance of flexibility and adaptability in the context of successful acquisitions. a. Flexibility and adaptability are the most crucial attributes for successful acquisitions. b. Flexibility and adaptability have minimal impact on acquisition success. c. Flexibility and adaptability contribute to the ability to adapt capabilities to new environments. d. Flexibility and adaptability are only relevant in hostile acquisitions.
c
How does market commonality influence a firm's motivation to respond to a competitor's attack? a. Higher market commonality leads to higher motivation to respond. b. Higher market commonality leads to lower motivation to respond. c. Lower market commonality leads to higher motivation to respond. d. Lower market commonality leads to lower motivation to respond.
c
Lawsuits over patent and copyright infringements are more common and intense in a. fast-cycle markets because the market is innovation-driven. b . standard-cycle markets because the firm's brand name is such an important competitive advantage. c. slow-cycle markets because of the desire to shelter the company from imitation of its competitive advantage. d . standard-cycle markets because innovation is rare, which gives the innovating firm a significant competitive advantage.
c
Lobelia's Nursery and Garden Resource Center has long provided high-quality, typical types of seasonal bedding plants to customers in the Mobile, Alabama, metropolitan area. It has traditionally competed with the other plant nurseries within a 50-mile radius of Mobile. Recently, Lobelia has opened a branch in Fairfax, Virginia. Lobelia's research shows that most Fairfax nurseries have only one location. Lobelia can expect the local Fairfax nurseries to a. be unmotivated to respond because their market position is not threatened by a new competitor from out of town. b . respond with fierce attacks because of resource dissimilarity. c. respond aggressively because of high market dependence. d . take no competitive response because of the lack of mutual interdependence among the nurseries.
c
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 a. realizes that he must understand competitors in order to predict their competitive actions and responses. b understands that he is the market leader in his niche and, thus, has a sustainable . competitive advantage. c. believes that he has placed his firm in a slow-cycle industry where concerns about protecting unique competencies dominate concerns about market share. d . realizes that his firm has such lower resources than other competitors that his chain is "competitively invisible" to them.
c
When substantial debt is used to finance acquisitions, firms with successful acquisitions a. seek financial slack. b. avoid long-term investments c. reduce the debt quickly. d. restrict managerial discretion in the use of cash flow.
c
When the target firm does not solicit the acquiring firm's bid, it is referred to as a(n) a. stealth raid. b. adversarial acquisition. c. takeover or unfriendly acquisition. d. leveraged buyout.
c
Which of the following are the two types of competitive actions? a. Aggressive; defensive b. Quality-based; cost-based c. Strategic; tactical d. Market-based; resourcebased
c
A firm is likely to respond to an attack by a competitor in all of the following situations EXCEPT when the attack a. is by a competitor known for risky or complex competitive behavior. b. makes the firm's market position less defensible. c. damages the firm's ability to use its capabilities. d. improves the competitor's market position.
a
After a leveraged buyout, what can typically occur? a. The selling of assets b. Further rounds of acquisitions c. Due diligence d. Private synergy
a
How does a firm's reputation influence a competitor's response to its current or planned action? a. A positive reputation makes competitors more likely to imitate the firm's successful actions. b. Competitors are more likely to respond to firms with a reputation for risky and unpredictable behavior. c. A firm's reputation does not have a significant impact on competitor responses. d. Competitors are less likely to respond to firms with a strong reputation as market leaders.
a
In customer feedback surveys, RTC Corp customers have indicated that they have a similar experience each time they interact with the company. This reflects success in which service quality dimension? a. Consistency b. Courtesy c. Accuracy d. Performance
a
Tesla recognized the potential of electric vehicle technology early on and made a move to focus on EVs, aiming to disrupt the automotive industry and lead the transition towards sustainable transportation. Which type of action was this that involved a significant commitment of organizational resources and is difficult to implement and reverse? a. Strategic action b. Tactical action c. Competitive response d. Strategic response
a
The flat-panel television market where prices have come down and competition has become more stable is best characterized as a. standard-cycle. b. fast-cycle. c. slow-cycle. d. competitive rivalry.
a
Which competitive actions and responses in markets are designed to seek large market shares, to gain customer loyalty through brand names, and to carefully control the firm's operations in order to consistently provide the same positive experience for customers? a. Standard-cycle b. Fast-cycle c. Slow-cycle d. Intermediatecycle
a
Companies in fast-cycle markets need to profit quickly from an innovative product for all of the following reasons EXCEPT: a. the technology used is not proprietary. b. the prices of component parts tend to rise rapidly. c. product prices fall quickly in fast-cycle markets. d. counterattacks from rivals come quickly.
b
Competition between candy makers (e.g., Hershey, Mars, Cadbury, Nestlé, and Godiva) where firms compete in package design (including package downsizing) and ease of availability is characteristic of a(n) a. slow-cycle market. b. standard-cycle market. c. fast-cycle market. d. intermediate-cycle market.
b
In 2014, Apple made a substantial acquisition, purchasing Beats Music and Beats Electronics for $3 billion dollars. This is an example of the strategy of acquisition. Compared to an internal product development, this acquisition would allow for a. immediate access to innovations in mature product markets. b. a more accurate prediction of return on investment. c. slower market entry. d. more effective use of company core competencies.
b
In the context of competitive rivalry, what is an actor's reputation? a. The perceived level of quality customer's associate with the firm's goods or service b. A positive or negative quality attributed to one's rival based on previous competitive behavior c. The willingness of capital markets to invest more in a firm based on past performance d. The degree of loyalty both internal and external stakeholders demonstrate to the firm
b
In the process of a merger a. one firm buys controlling interest in another firm. b. two firms agree to integrate their operations on a relatively coequal basis. c. two firms combine to create a third separate entity. d. one firm breaks into two firms.
b
McDonalds, Burger King, Wendy's, and Taco Bell are all in the fast-food industry and are often competing for the purchases of an overlapping customer base. Competitive behavior refers to the set of competitive actions and responses a firm takes to build or defend its competitive advantages and improve its a. financial performance. b. market position. c. stakeholder relationships. d. organizational structure.
b
Netflix has employed various incremental adjustments as part of its market-based moves to fine-tune its strategy. These include pricing adjustments, content strategies, user interface enhancements, and expansion into markets overseas. What is a market-based move that they took to fine-tune a strategy, involving fewer resources and being relatively easy to implement and reverse called? a. Strategic action b. Tactical action c. Competitive response d. Strategic response
b
PrecisionWorks Engineering Ltd. is an engineering firm that brought you on as a business analyst shortly after you graduated from college. They are looking to make an acquisition but have lacked due diligence in the past. One of the pitfalls is acquiring a firm with large amounts of debt. The use of high levels of debt in acquisitions has contributed to a. the increase in above-average returns earned by acquiring firms. b. an increased risk of bankruptcy for acquiring firms. c. the confidence of the stock market in firms issuing junk bonds. d. an increase in investments that have long-term payoffs.
b
Procter & Gamble (P&G) is a multinational consumer goods company that competes in various product categories such as household cleaning, personal care, and beauty products. They are constantly adapting their competitive advantages in the industries they operate in. Which term describes a strategic or tactical action that a firm takes to build or defend its competitive advantages or improve its market position? a. Competitive response b. Strategic action c. Tactical response d. Strategic response
b
Quality affects competitive rivalry because a competitor whose products suffer from poor quality likely will a. initiate more competitive actions until the firm returns to profitability. b. initiate fewer competitive actions until the quality problems are corrected. c. initiate more competitive actions until the quality problems are corrected. d. advertise more until customers believe the quality has improved.
b
Tesla, Inc. is the maker of several different models of electric vehicles ("EVs"). They are very much dependent on tax incentives and minerals such as silicon, lithium, and cobalt. When a firm is overly dependent on one or more products or markets, and the intensity of rivalry in that market is high, the firm may wish to do what by making an acquisition? a. Increase new product speed to market b. Broaden its competitive scope c. Increase its economies of scale d. Overcome entry barriers
b
There are many large financial institutions, like Charles Schwab or Fidelity, that offer the advantage of easy- to- use websites and applications to manage a client's assets. Though, not all competitive advantages accrue to large-sized firms. A major advantage of smaller firms is that they a. are more likely to have organizational slack. b. can launch competitive actions more quickly. c. have more loyal and diverse workforces. d. can wait for larger firms to make mistakes in introducing innovative products.
b
Walmart's aggressive pricing strategy is a strategic action that plays a major role in how it competes. a. Ture b. False
b
Which of the following is NOT a result of overdiversification? a. Executives do not have a rich understanding of all of the firm's business units. b. Managers emphasize strategic controls rather than financial controls. c. Firms use acquisition as a substitute for innovation. d. Managers become short-term in their orientation.
b
Apple and Samsung are companies that are both in the same industry and offer similar products. They can be thought of as having a rivalry. In response to a rival firm's temporary weakness, firms are likely to engage in competitive actions because it makes the rival firm less able to a. Innovate b. Adapt c. Respond d. Anticipate
c
By definition, the act of two or more firms competing against each other in more than one product area and in multiple geographic markets is called a. competitive dynamics. b. competitive behavior. c. multipoint competition. d. competitive rivalry.
c
Magma, Inc., acquired Vulcan, Inc., three years ago. Effective integration of the two companies' culture was never achieved, and the two firms' assets were not complementary. It is very likely that Magma will a. go public through an IPO. b. review the due diligence information collected before the acquisition. c. restructure. d. review its tactical-level strategies.
c
Research results indicate all of the following EXCEPT: a.immediately after the announcement of a planned acquisition, the stock price of the majority of acquiring firms generally declines. b.shareholders of acquired firms often earn above-average returns from an acquisition. c.the majority of acquisitions increase long-term value for the acquiring firm. d.shareholders of acquiring firms typically earn returns from the transaction that are close to zero.
c
What attribute of successful acquisitions emphasizes continuing investments in research and development (R&D)? a. Complementary assets b. Friendly acquisitions c. Innovation investments d. Flexibility and adaptability
c
What tactic does Walt Disney focus on and is typical of a slow-cycle market? a. Innovation b. Total quality c. Proprietary rights d. Economies of scale
c
Which factor influences a firm's means to attack a competitor or respond to its actions? a. Awareness b. Motivation c. Ability d. Market Commonality
c
Which of the following industries can be LEAST described as a slow-cycle market? a. Freight railroads b. Pharmaceuticals c. Cell phone providers d. Private ownership of highways and bridges
c
Why do strategic actions generally elicit fewer responses from competitors compared to tactical actions? a. Strategic actions involve a significant commitment of resources and are difficult to implement. b. Strategic actions target a larger number of a rival's customers. c. Strategic actions have a longer time delay for implementation and assessment. d. Strategic actions have a strong impact on a competitor's market position.
c
How does competitive rivalry primarily influence business-level strategy? a. It determines the firm's core competencies. b. It shapes the firm's cooperative strategies. c. It influences the firm's international expansion. d. It affects the firm's competitive success in specific product markets.
d
Multipoint competition occurs when firms a. sell different products to the same customer. b. have a high level of awareness of their competitors' strategic intent. c. simultaneously enter into an attack strategy. d. compete against each other in several geographic or product markets.
d
The ability of Disney to maintain its competitive advantage through proprietary rights to its characters would be severely weakened if a. theme parks with alternative cartoon characters were built in large numbers. b. numerous lawsuits against copyright thieves tainted the reputation of the company. c. Disney attempted to move beyond its traditional industry. d. Disney's cartoon characters became widely perceived as old-fashioned and unappealing.
d
Researchers have found that shareholders of acquired firms often a. earn above-average returns. b. earn below-average returns. c. earn close to zero as a result of the acquisition. d. are not affected by the acquisition.
a
Royalware, based in New England, wanted to establish a foothold in the Midwest, so it made an unsolicited bid to purchase TrueBlue, a similar firm based in Indiana. This is an example of a takeover. a. Ture b. False
a
Walmart initially used a focused cost leadership strategy to compete only in small communities by using sophisticated logistics systems and efficient purchasing practices to gain a competitive advantage. The response of local competitors was __________ because they
b
What are the two main factors that commonly affect firms' efforts to merge on a coequal basis? a. Determining the highest acquisition premium and using defense mechanisms b. Fusing disparate corporate cultures and reaching an agreement on the value of each company c. Completing multiple exchanges and addressing regulator challenges d. Deciding who will lead the merged firm and preventing unsolicited bids
b
What occurs when one firm buys a controlling, or 100 percent interest, in another firm? a. Merger b. Acquisition c. Spin-off d. Restructuring
b
Mighty Mike's, a manufacturer of power tools for the home hobbyist, has seen its main competitor, MyTools, introduce a line of power tools that are smaller sized, lighter weight, and suitable for women and older hobbyists who have weaker hands than the typical male workshop hobbyist. Mighty Mike's is waiting to see whether MyTools' new line is a success. Mighty Mike's could be classified as a second mover. a. Ture b. False
a
A divestiture by GE was the sale of its biopharma unit to Danaher Corporation back in 2020. The biopharma business, although successful in its own right, was not considered a core business for GE. By divesting this non-core business, GE aimed to reduce complexity, enhance its financial position, and sharpen its strategic focus on industrial manufacturing and technology. What type of restructuring strategy involves divesting businesses that are unrelated to a firm's core businesses? a. Downscoping b. Leveraged buyouts c. Complete sell-off d. Downsizing
a
A leveraged buyout will often result in a short-term outcome of __________, which, in turn, leads to a long-term outcome of __________. a. high debt costs; higher risk b. high debt costs; higher performance c. high debt costs; lower performance d. emphasis on strategic controls; higher risk
a
A manager in your company is proposing the acquisition of Taylor Company, which has developed a new, innovative product, instead of adopting a strategy of developing new products in-house. All of the following arguments are correct EXCEPT: a. the acquisition of Taylor should be primarily for defensive rather than strategic reasons. b . research suggests that acquisition strategies are a common means of avoiding risky internal ventures. c. the outcomes of acquisitions can be estimated more easily and accurately than the outcomes for an internal product development process. d . acquisitions could become a substitute for innovation within your firm.
a
Competitive rivalry has the most effect on which of a firm's strategies? a. Business-level b. Corporatelevel c. Acquisition d. International
a
ElectroTech Manufacturing Solutions is a mid-size steel company that you are interning for in the summer. They are looking to acquire a smaller firm to expand operations. Without effective due diligence, the a. acquiring firm is likely to overpay for an acquisition. b. firm may miss its opportunity to buy a well-matched company. c. acquisition may deteriorate into a hostile takeover, reducing the value-creating potential of the action. d. firm may be unable to act quickly and decisively in purchasing the target firm.
a
In 2018, AT&T joined with Time Warner, creating a massive media and telecommunications conglomerate. This brought together AT&T's extensive network infrastructure and distribution capabilities with Time Warner's vast content portfolio, which includes Warner Bros., HBO, and CNN, among others. Which type of strategy involves two firms agreeing to integrate their operations on a relatively coequal basis? a. Merger b. Acquisition c. Takeover d. Hostile acquisition
a
Internal product development is often viewed as a. carrying a high risk of failure. b. the only reliable method of generating new products for the firm. c. a quicker method of product launch than acquisition of another firm. d. critical to the success of biotech and pharmaceutical firms.
a
A firm with greater multipoint contact is likely to act in which of the following ways? a. More likely to initiate an attack and also more likely to respond aggressively when attacked. b. Less likely to initiate an attack, but more likely to respond aggressively when attacked. c. Less likely to initiate an attack and also less likely to respond aggressively when attacked. d. More likely to initiate an attack, but less likely to respond aggressively when attacked.
b
An example of two firms that face each other in multiple markets is Apple and Samsung. Both compete in various industries and markets, including smartphones, tablets, smartwatches, and other consumer electronics. Both companies are major players in the global smartphone market and are known for their flagship devices, such as the iPhone from Apple and the Galaxy series from Samsung. Compared with firms that compete in only one market, among firms that face one another in multiple markets in this way, there is a. similar competitive rivalry. b. less competitive rivalry. c. more competitive rivalry. d. no competitive rivalry.
b
Boeing's decision to commit the resources required to build the super-efficient 787 midsized jetliner is an example of a tactical action. a. Ture b. False
b
Sales of watches among teenagers and twenty-somethings are declining rapidly as this age group uses cellphones, iPads, and other devices to tell time. A company that specializes in selling inexpensive watches to this age group may wish to consider which strategy in order to develop new products other than watches? a. Unrelated diversification b. Backward integration c. Forward integration d. Horizontal acquisition
a
Which restructuring strategy is typically associated with lower firm performance? a. Downsizing b. Downscoping c. Leveraged buyouts d. Complete sell-off
a
An investor is analyzing two firms in the same industry which are basically identical. She is looking for long-term performance from her investment. Both firms are undergoing restructuring. One firm is involved in substantial downsizing, and the other firm is undertaking aggressive downscoping. The investor should invest in the a.downscoping firm because the higher debt load will discipline managers to act in shareholders' best interests. b.downscoping firm because this will cause the firm to refocus on its core business. c.downsizing firm because it will be making decisions based on tactical strategies. d.downsizing firm because it is eliminating employees who are essentially "deadweight" and are dragging down the firm's profitability.
b
Claude holds a large number of shares of Bayou Beauty, a regional brewing company that is considered a likely takeover target by a major international brewer. It would probably be in Claude's financial interest if Bayou Beauty's owners
b
Coca-Cola and PepsiCo compete across a number of products (e.g., soft drinks, bottled water) and geographic markets (U.S. and foreign markets) indicating that the companies have market commonality a. Ture b. False
b
Compared with downsizing, which strategy has (have) a more positive effect on firm performance? a. Reconfiguring b. Downscoping c. Leveraged buyouts d. Acquisitions
b
In 2014, Apple made a substantial acquisition, purchasing Beats Music and Beats Electronics for $3 billion dollars. This is an example of the strategy of acquisition. The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because a. of barriers to entry in many industries. b . it is difficult and time intensive for companies to develop products that differ from their current product line. c. innovation in both the acquired and the acquiring firm is enhanced by the exchange of competencies resulting from acquisition. d . unrelated acquisitions are usually uncomplicated since the acquired firm is allowed to continue to function independently as it did before acquisition.
b
United Technologies Corp. (UTC) uses acquisitions of firms such as Otis Elevator Company (elevators, escalators, and moving walkways) and Carrier Corporation (heating and air conditioning systems) as the foundation for implementing its related diversification strategy. a. Ture b. False
b
What is the purpose of using debt to finance a leveraged buyout (LBO)? a. To reduce the number of a firm's employees b. To downscope the company and concentrate on core businesses c. To correct managerial mistakes and restructure distressed assets d. To quickly sell several assets and make a profit
b
Which of the following is true of a firm that has high market dependence? a. Its competitive advantages are more sustainable. b. It is likely to respond strongly to attacks threatening its market position. c. Its position helps protect it from attacks by competitors. d. It will respond quickly to any threat to its position.
b
Which two drivers of competitive behavior affect the awareness and motivation of a firm to undertake actions and responses? a. First-mover advantages; corporate size b. Market commonality; resource similarity c. Management capabilities; competitive analysis d. Speed of management decisions; management actions
b
Why is downscoping considered to have a more positive effect on firm performance than downsizing? a. Downscoping reduces the number of a firm's employees. b. Downscoping allows firms to focus on their core businesses. c. Downscoping involves divesting businesses to another firm. d. Downscoping is a form of leveraged buyout.
b
Why is it important for an acquisition to have complementary assets? a. It increases the likelihood of a friendly transaction. b. It facilitates the integration of operations with more speed. c. It contributes to effective due-diligence processes. d. It enables executives to adapt capabilities to new environments.
b
Which of the following statements is false? a. Synergy resulting from an acquisition generates gains in shareholder wealth beyond what they could achieve through diversification of their own portfolios. b . Private synergy results when the combination of two firms yields competencies and capabilities that could not be achieved by combining with any other firm. c. Private synergy is easy for competitors to understand and imitate. d . Private synergy is more likely when the two firms in an acquisition have complementary assets.
c
Which of the following statements is false? a. First movers tend to take higher risks than second and later movers. b. First movers tend to have significantly higher revenues than second movers. c. First movers have lower survival rates than second and late movers. d. First movers tend to have more organizational slack than late movers.
c
Which type of restructuring strategy is more commonly completed in mature industries with stable cash flows? a. Downsizing b. Downscoping c. Leveraged buyouts d. Complete sell-off
c
Ambrose is a scientist working for a pharmaceutical company. His company was acquired by a rival pharmaceutical company, and now it is involved in downsizing and downscoping. Ambrose is concerned about his job security, since he is actively involved in amateur sports in his community and does not wish to disrupt his current lifestyle. Ambrose's job will MOST likely be secure if a. Ambrose's research is in a non-core activity. b. the acquisition has been financed by junk bonds. c. Ambrose is in a position to take a poison pill. d. Ambrose is a key employee in the firm's primary business.
d
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, Rapid-Built and ModMod a. are direct mutually acknowledged competitors. b. have high resource similarity. c. have high market commonality. d. are probably not engaged in intense competitive rivalry.
d
Synthronix Industries is a firm that is looking to make an acquisition of a competing firm. They are in the stages of examining the internal business model and financials of the company. Acquisitions can take a lot of time for top level managers for all the following reasons EXCEPT: a. the integration process after acquisition requires managerial attention. b. they must prepare for acquisition negotiations. c. managers are involved in the search for viable acquisition candidates. d. only top managers can perform the required due diligence.
d
TableTop Industries just went through a restructuring and is experiencing reduced labor costs. It is most likely that TableTop just completed what? a. A downsizing b. A downscoping c. A management buyout d. An employee buyout
d
What is the main characteristic of a complete sell-off in restructuring? a. The acquiring firm uses a significant amount of debt to finance the acquisition. b. The firm that owns the business being divested creates an independent company. c. The parent company sells only a partial interest in the company to investors. d. The firm sells a business directly to another firm.
d
Which of the following is NOT a characteristic of a successful acquisition? a. The acquiring firm has a large amount of financial slack. b. The acquired and acquiring firms have complementary assets and/or resources. c. Innovation and R&D investments continue as part of the firm's strategy. d. Investments in advertising and image building are made quickly.
d
Apple and Samsung are companies that are both in the same industry and offer similar products. What is the term used to describe the complete set of competitive actions and responses taken by all firms competing within a market? a. Competitive dynamics b. Competitive behavior c. Market rivalry d. Value proposition
a
Apple is known for its continuous innovation and introduction of new products and technologies in the consumer electronics industry. What is a strategic or tactical action that a firm takes to counter the effects of a competitor's competitive action called? a. Competitive response b. Strategic action c. Tactical response d. Strategic response
a
Both Coca-Cola and P&G engage in multimarket competition by competing across different product categories and geographic markets, aiming to capture market share and maintain a competitive edge in each market they operate in. Which term describes the phenomenon where firms compete against each other in multiple product or geographic markets? a. Multipoint competition b. Cooperative competition c. Monopolistic competition d. Oligopolistic competition
a
Coca-Cola recognizes that its actions and initiatives have a direct impact on its competitors and vice versa. For example, when Coca-Cola introduces a new product or launches a marketing campaign, it is aware that PepsiCo and other competitors will likely respond with their own product innovations or promotional activities. Which driver of competitive behavior refers to the extent to which competitors recognize the degree of their mutual interdependence? a. Awareness b. Motivation c. Ability d. Market
a
Apple recognized the potential of the mobile phone market and responded with the launch of the iPhone in 2007. This move disrupted the industry, challenging established players like Nokia and BlackBerry. Apple's innovative approach and focus on user experience resonated with consumers, leading to the iPhone's immense success and market dominance. What term describes their incentive to take action or respond to competitors based on perceived gains and losses? a. Awareness b. Motivation c. Ability d. Market commonality
b
Apply makes very high-end cell phones, tablets, wearables, and has built a brand through their record in computing. Without quality, the firm's products would a. compete effectively on the basis of low price. b . lack credibility among customers. c. be exported to developing countries because they are not competitive in the United States or developed countries. d . be associated with predatory competition.
b
Because Coca-Cola, Nestlé, 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) a. slow-cycle market. b. standard-cycle market. c. fast-cycle market. d. intermediate-cycle market.
b
Consumer goods producers are innovating in terms of healthy products. This type of incremental innovation is typical of a. fast-cycle markets. b. standard-cycle markets. c. incremental-cycle markets. d. slow-cycle markets.
b
How does resource dissimilarity influence the competitive actions and responses firms choose to take? a. It leads to quicker response times by firms with a resource disadvantage. b. It leads to longer delays by firms with a resource disadvantage. c. It leads to more aggressive actions by firms with a resource disadvantage. d. It leads to more cautious responses by firms with a resource disadvantage.
b
Coca-Cola and PepsiCo both operate in the soft drink space. They have a variety of offerings in the soda, uncarbonated, and sparkling water space. Which term describes firms operating in the same market, offering similar products, and targeting similar customers? a. Stakeholders b. Ecosystem Partners c. Competitors d. Suppliers
c
The set of both competitive actions and responses that a firm takes to build or defend its competitive advantages and to improve its position in the market is known as a. Competitive dynamics. b. Competitive behavior. c. Multipoint competition. d. Competitive rivalry.
b
36. Akamai Technologies is a dominant player in the content delivery network (CDN) market. Akamai is not very diversified (i.e., is dependent on the CDN market). If rival CDN providers such as Limelight Networks and Level 3 Communications lower their basic CDN service prices, which of the following would Akamai likely do? a. Raise its prices b. Do nothing since it is the market leader c. Exit the industry d. Lower its prices
d
The ongoing set of competitive actions and competitive responses that occur among firms as they maneuver for an advantageous market position is known as a. competitive dynamics. b. competitive behavior. c. multipoint competition. d. competitive rivalry.
d
Which of the following organizations has the highest market dependence? a. Chain of rapid-service oil change shops b. Manufacturer of chemicals for the international pharmaceutical industry c. Regional department store having 26 locations in the Northwest d. Company that specializes in making replacement tiles for the space shuttle
d
While no firm or company wants a product to break, that does happen. In customer feedback surveys, ChirOpt customers have indicated that when they have a product that breaks, they are pleased with both the ease and the speed of the repair. This reflects success in which product quality dimension? a. Performance b. Consistency c. Durability d. Serviceabilit y
d
Why are competitors with high market dependence more likely to respond strongly to attacks? a. They have fewer resources to defend their market position. b. They rely heavily on the revenues and profits from that particular market. c. They are more risk-averse and defensive in their competitive behavior. d. They have a higher market share and brand recognition to protect.
d
The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a(n) a. vertical acquisition. b. unrelated acquisition. c. horizontal acquisition. d. merger of equals.
a
The failure to do which of the following appropriately will result in too many employees doing the same work and prevent the new firm from realizing the cost synergies it anticipated? a. Downsizing b. Spinning off c. Downscoping d. Buying out
a
Thomas is an upper-middle-level manager for a firm that has been actively involved in acquisitions over the last 10 years. The firm has grown much larger as a result. Thomas is dismayed to find that recently the managerial culture of the firm has been turning more and more to using which type of controls? a. Bureaucrati c b. Strategic c. Tactical d. Organic
a
When Disney acquired Pixar in 2006, the integration of their operations led to significant synergies. Disney, with its distribution and marketing capabilities, and Pixar, with its creative and technological expertise, were able to combine their strengths to produce highly successful animated films such as "Toy Story," "Finding Nemo," and "The Incredibles." Which attribute of effective acquisitions refers to the integration of two firms' operations creating synergy? a. Complementary assets b. Friendly acquisitions c. Due-diligence processes d. Flexibility and adaptability
a
Which attribute of successful acquisition strategies involves maintaining a low or moderate level of debt after the acquisition? a. Financial slack b. Innovation investments c. Flexibility and adaptability d. Due-diligence processes
a
Which concept relates to the gains or losses a firm expects to experience if it attacks a rival or responds to an attack by a rival? a. Motivation b. Awareness c. Responsivenes s d. Ability
a
Which of the following describes a situation in where organizations are direct competitors and are fully aware of the competition? a. When firms have high market commonality and high resource similarity b. When firms have high market commonality and low resource similarity c. When firms have low market commonality and high resource similarity d. When firms have low market commonality and low resource similarity
a
Why do shareholders of the acquiring firms typically earn returns close to zero in an acquisition? a. Due to skepticism about achieving synergies b. Due to the difficulty of determining the worth of the target firm c. Due to the payment of excessive premiums d. Due to the influence of defense mechanisms
a
Why is downscoping generally associated with more positive outcomes in both the short and long term? a. It reduces debt costs and increases strategic controls. b. It leads to increased investment in R&D. c. It results in a short-term managerial focus. d. It focuses on downsizing and reducing the number of employees.
a
Facebook acquired the popular messaging app WhatsApp for approximately $19 billion. The acquisition was a mutually agreed-upon transaction between the two companies. WhatsApp's cofounder and CEO expressed his support for the acquisition and remained involved in the company after the acquisition. This allowed for a smoother integration of the two companies' operations, and WhatsApp continued to operate as a standalone app while benefiting from Facebook's resources and support. What type of acquisition such as this facilitates the integration of the acquiring and acquired firms? a. Complementary acquisitions b. Friendly acquisitions c. Hostile acquisitions d. Due-diligence acquisitions
b
In 2012, Facebook acquired Instagram, a popular photo-sharing app, for approximately $1 billion. This acquisition was significant as Instagram had quickly gained a large user base and was seen as a potential competitor to Facebook in the social media space. This was an example of an acquisition strategy. What is the main objective of this type of strategy? a. To integrate operations on a coequal basis b. To create a subsidiary business within the acquiring firm's portfolio c. To prevent an unrequested takeover bid
b
On the whole, there are more competitive responses to a. strategic actions than to tactical actions. b. tactical actions than to strategic actions. c. buyer pressures than to supplier pressures. d. the demands of the top management team than to industry structural pressures.
b
One notable divestiture was the spin-off of P&G's food and beverage division, which included popular brands like Folgers coffee and Pringles snacks. P&G decided to separate these brands into a standalone company called The J.M. Smucker Company. The spin-off allowed P&G to concentrate its resources and investments on its core categories of personal care, household products, and beauty brands. Which restructuring strategy, such as this, is generally associated with reduced debt costs and increased strategic controls? a. Downsizing b. Downscoping c. Leveraged buyouts d. Complete sell-off
b
SpeakEasy, a U.S. software company that specializes in voice-recognition software, wishes to rapidly enter the growing technical translation software market. This market is dominated by firms making highly differentiated products. To enter this market, SpeakEasy would be best served if it considers a(n) a. vertical acquisition of a firm that uses technical translation products. b. acquisition of a highly related firm in the technical translation market. c. cross-border merger, preferably with an Indian or Chinese company. d. strategy of internally developing the technical translation products needed to compete in this market.
b
Wilberforce Press is a small book publishing firm in Iowa that has been owned by the same family since 1895. It is being purchased by Ozarka Publishing, another family-run business in Nebraska, which has been a specialty publisher for 77 years. Each company is known for its unique culture passed down from its founders. Executives and employees in both firms have "grown up" with their companies. Because both of these companies have a long, stable history in highly related industries, this acquisition has a high probability of success. a. Ture b. False
b
A friendly acquisition a. raises the price that has to be paid for a firm. b. enhances the complementarity of the two firms' assets. c. facilitates the integration of the acquired and acquiring firms. d. allows joint ventures to be developed.
c
A leveraged buyout (LBO) is the acquisition of Dell Inc. by its founder Michael Dell in collaboration with private equity firm Silver Lake Partners in 2013. The LBO allowed Michael Dell and Silver Lake Partners to take control of Dell Inc. and operate it as a private company away from the scrutiny of public markets. By using a significant amount of debt financing, they were able to finance the acquisition and take advantage of Dell's cash flow and assets to service the debt obligations. What is the purpose of a leveraged buyout as a restructuring strategy? a. To reduce the number of a firm's employees b. To divest businesses unrelated to the firm's core businesses c. To correct managerial mistakes and restructure distressed assets d. To build firm resources and expand operations
c
An example of the potential problem of downsizing in terms of human capital is the downsizing experienced by IBM in the 1990s. During that time, IBM underwent a significant restructuring effort, which involved a substantial reduction in its workforce. What is one potential problem of downsizing in terms of human capital? a. Decreased debt costs b. Increased strategic controls c. Loss of valuable knowledge and experience d. Short-term managerial focus
c
BradyHawk found itself in a bidding war and paid a 32 percent premium to acquire LasLuces in 2017 and issued more stock to raise capital. This illustrates what problem associated with acquisitions? a. Integration difficulties b. Inadequate evaluation of the target c. Large or extraordinary debt d. Too much diversification
c
Bubble-Up, Inc., is a small manufacturer of educational toys for children under age 10. It has co-existed with three other competitors in the educational toy industry for over 20 years, each of them maintaining a stable market share. There is a widespread rumor that Mega-Toy, Inc., the market leader in the broad children's toy market, has decided to target educational toys. Which of the following statements is MOST likely true? a. The owners of Bubble-Up are unconcerned about Mega-Toy's entry to the market because of the resource dissimilarity between the firms. b . Bubble-Up's greater organizational slack will allow it to aggressively attack Mega- Toy. c. Bubble-Up's smaller size may make it more flexible in introducing innovations than Mega-Toy. d . Competitive rivalry will not increase for Bubble-Up because Mega-Toy is not dependent on the educational toy market.
c
Firms with fewer competitive resources than the acting firm are more likely to a. not respond to competitive actions. b. respond quickly to competitive actions. c. delay responding to competitive actions. d. respond to strategic actions, but not to tactical actions.
c
Hilliard Pharmaceuticals and Ahrens Vitamins, Inc., have high market commonality, both geographically and in the market segments in which they compete. Hilliard, the number two firm in the industry, has undertaken a major strategic attack upon Ahrens, the market leader. Which of the following statements is MOST likely to be true? a. Ahrens will not respond aggressively since this is a strategic move and not a tactical action. b. As the market leader, Ahrens has little to fear from an attack by Hilliard and will not expend organizational slack on a major response. c.Ahrens will respond aggressively because of the high multipoint contact between Hilliard and Ahrens. d.Ahrens will respond after a long delay as the nutrition supplement industry is a slowcycle industry.
c
In 2011, HP acquired Autonomy, a British software company, for $11.1 billion. However, just a year after the acquisition, HP announced an $8.8 billion write-down of Autonomy's value, citing accounting improprieties and misrepresentations by Autonomy's management. In order to avoid a situation like this, what is an important component of effective due-diligence processes in acquisitions? a. Financial slack b. Innovation investments c. Selection and evaluation of target firms d. Debt equity or cash
c
Intensified rivalry within an industry results in a. increased hiring across the industry. b. increased total revenues across the industry. c. decreased average profitability across the industry. d. increased entries into the industry.
c
Two firms, such as Apple and Samsung, are direct and mutually acknowledged competitors. What does this mean with regards to their market commonality and resource similarity? a. They have low market commonality and high resource similarity. b. They have low market commonality and low resource similarity. c. They have high market commonality and high resource similarity. d. They have high market commonality and low resource similarity.
c
What is one potential negative outcome of leveraged buyouts? a. Reduced debt costs b. Increased investment in R&D c. Short-term and risk-averse managerial focus d. Focus on core businesses
c
What trade-off is often involved in leveraged buyouts? a. Reduced debt costs and increased efficiency b. Increased investment in R&D and long-term strategic focus c. Short-term and risk-averse managerial focus and reduced financial risk d. Focus on core businesses and downsizing
c
Which of the following is an example of a strategic action? a. A "two movies for the price of one" campaign by Redbox b. Use of product coupons by a local grocer c. Entry into the European market by Home Depot d. Fare increases by Southwest Airlines
c
Which of the following is an example of a tactical action? a. Walmart's launch of Sam's Club stores b. Continental Airlines' exit from a hub airport in Denver c. Netflix beginning to offer music in addition to movies d. Dell's launch of a new line of high performance, custom-made PCs
c
A firm that is LEAST likely to launch competitive actions is one that has a. organizational slack. b. advanced research and development. c. recently improved the quality of its products. d. large size.
d
Baby Doe's, a designer and manufacturer of children's clothing, has decided to purchase a retail chain specializing in children's clothing. This purchase is a(n) a. merger. b. unrelated acquisition. c. horizontal acquisition. d. vertical acquisition.
d
Cross-border acquisitions are critical to U.S. firms competing internationally a. if they are to develop differentiated products for markets served. b. when market share growth is the focus. c. where consolidated operations are beneficial. d. if they wish to overcome entry barriers to international markets.
d
In general, firms are more aware of competitors that have similar resources and that a. have low market dependence. b. are late movers. c. have low market commonality. d. compete against the firm in multiple markets.
d
Which of the following steps, if taken by Walmart, would be characterized as a strategic rather than tactical action? a. Aggressive pricing to ensure it is a price leader b. Aggressively pricing toys and electronics during the holiday season c. Aggressively pricing school-related items in the back-to-school season d. Entering a new foreign market
d
Why are flexibility and adaptability important attributes of successful acquisitions? a. They facilitate the integration of operations with more speed. b. They contribute to effective due-diligence processes. c. They help maintain a low level of debt after the acquisition. d. They enable executives to adapt capabilities to new environments.
d
