Chapter 6 solutions

Corporate restructuring includes

Capital, asset, & management restructuring.

______ reflect(s) the collective learning in organizations such as how to coordinate production skills, integrate multiple streams of technologies, & market & merchandise diverse products & services

Core Competencies

Through joint ventures, firms can directly acquire the assets and competencies of other firms

False

Vertical integration should be undertaken when demand for the organization's products is very unstable

False

When firms diversify into unrelated businesses, the primary potential benefits are horizontal relationships, I.e., businesses sharing tangible and intangible resources

False

An antitakeover tactic called (a) ______ Is when a firm offers to buy shares of their stock from a company or individual planning to acquire their firm at a higher price than the unfriendly company paid for it.

Greenmail

Downsides or limitations of mergers & acquisitions include all EXCEPT

It is a slow means to enter new markets an acquire skills & competences. Include: expensive premiums that are frequently paid to buy a premium/ difficulties in integrating the activities and resources of the acquired firm into a corporation's on-going operations.

All of the following are limitations (or downsides) of the BCG matrix EXCEPT

It takes a dynamic view of competition which can lead to overly complex analyses. Limitations: every business cannot be accurately measured and compared on the 2 dimensions/ views each business as a stand alone entity and ignores the potential for synergy across businesses/ BCG matrix can lead to some troublesome and overly simplistic prescriptions

The risks of vertical integration include all of the following EXCEPT

Lack of control over valuable assets. Include: costs & expenses associated with increased overhead and capital expenditures/ problems associated with unbalanced capacities along the value chain/ additional administrative costs associated with managing a more complex set of activities.

A "cash cow" refers to a business that has

Low market growth and relatively high market share

The 3 primary means by which a firm can diversify

Mergers & acquisitions/ joint ventures and strategic alliances/ internal development

_______ is when a firm's corporate office helps subsidiaries make wise choices in their own acquisitions, divestures, and new ventures

Parenting

"Golden Parachutes" refers to

Pay given to executives fired because of a takeover

An antitakeover tactic in which existing shareholders have the option to buy additional shares of stock at a discount to the current market price is called

Poison pill

All of the following are guidelines for managing strategic alliances EXCEPT

Relying primarily o a contract to make the joint venture work Guidelines: establishing a clear understanding between partners/ not shortchanging your partner/ working hard to ensure a collaborative relationship between partners

_______ is when a firm tries to find and acquire either poorly performing firms with unrealized potential or firms in industries on the threshold of significant, positive change

Restructuring

When management uses common production facilities or purchasing procedures to distribute different but related products, they are

Sharing activities

When using a BCG matrix, a business that currently holds a large market share in a rapidly growing market and that has minimal or negative cash flow would be known as a

Star

A company offering local telecommunications service combines resources with an international company that manufactures digital switching equipment to research a new type of telecommunications technology. This is an example of

Strategic alliance

In BCG matrix, a business that has a low market share in an industry characterized by high market growth is termed a

?

McKesson, a large distribution company, sells many product lines such as pharmaceuticals and liquor through its super warehouses. This is an example of

Achieving economies of scope through related diversification

Individual Investors are dependent upon the corporations managers to

Add value to their investments in a way that the stockholders could not accomplish on their own

Phillip Morris bought Miller Brewing & used its marketing expertise to improve Miller's market share. This Justification for diversification is best described as

Capitalizing on core competencies

A firm that incorporates more processes toward the original source of raw materials is an example of forward integration

False

A publishing company that purchases a chain of bookstores to sell its books is an example of unrelated diversification

False

Market power refers to cost savings from leveraging core competencies or sharing activities among the businesses in a corporation

False

Market transactions do NOT involve transaction costs

False

Portfolio management should be considered as the primary basis for formulating corporate-level strategies

False

The two principal means by which firms achieve synergy through market power are pooled negotiating power and corporate parenting

False

Antitakeover tactics include all of the following EXCEPT

Golden Handcuffs Include: greenmail, golden parachutes, poison pills

Portfolio management frameworks share which of the following characteristics?

Grid dimensions are based on external environments and internal capabilities/market positions.

_______ may be time consuming and, therefore, firms may forfeit the benefits of speed that growth through _______ and ________ can provide.

Internal development, mergers, acquisitions

Transaction costs include all of the following EXCEPT

Agency costs Include: search, negotiating, & monitoring costs

Divesting businesses can accomplish many different objectives, including

All of these Enabling managers to focus their efforts more directly on the firm's core businesses/ providing the firm with more resources to spend on more attractive alternatives/ raising cash to help fun existing businesses

Which of the following statements regarding internal development as a means of diversification is FALSE

An advantage of internal development is that it is generally faster than other means of diversification and firms can benefit from speed in developing new products and services

Shaw Industries, a giant carpet manufacturer, increases its control over raw materials by producing much of its own polypropylene fiber, a key input into its manufacturing process. This is an example of

Vertical integration

Corporate level strategy addresses two related issues

What businesses to compete in & how these businesses can achieve synergy

Vertical integration is attractive when market transaction costs are higher than internal administrative costs.

True

An advantage of internal development is that firms do not have to combine activities across the value chains of many companies and merge company cultures

Truuuuueeee

Portfolio management matrices are applied to what level of strategy

Corporate level

A firm should consider vertical integration when

The firm's suppliers of raw materials are often unable to maintain quality standards.

For a core competence to be a variable basis for the corporation strengthening a new business unit, there are three requirements. Which of the following is not one?

The new business must have an established large market share. -3 requirements are Competence must help the business gain strength relative to its competition/ new business must be similar to existing businesses to benefit from a core competence/ collection of competencies should be unique so they can't be easily imitated

Vertical integration is attractive when

Transaction costs are higher than internal administrative costs

Among the disadvantages of acquisitions are the expensive premiums that are frequently paid to acquire a business

True

An advantage of mergers and acquisitions is that they can enable a firm to rapidly Enter new product markets

True

Diversification that results in strengthening the value chain and increasing competitive advantages is the best possible example of investing stockholders' funds in a way that individual investors can not

True

One of the risks of vertical integration is that there may be problems associated with unbalanced capacities or unfilled demands along a firm's value chain

True

Portfolio management matrices generally consist of two axes that reflect industry or market growth and the market share of a business

True

Similar businesses working together or the affiliation of a business with a strong parent can strengthen a firm's bargaining position relative to suppliers and customers

True

Two main sources of synergy in unrelated diversification are parenting and financial synergies via portfolio management

True