MGT409 Exam 2

Which of the following are ways that a combination strategy can improve a company's position vis-a-vis Porter's forces? (Check all that apply.)

Integrating value-chain activities lowers costs so the company can better withstand increases by suppliers. Potential entrants may face high barriers if they do not have the financial or physical resources to compete head-to-head. Low pricing and a wide product selection reduces buyer bargaining power due to the lack of competitors that can provide comparable cost/value.

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

Internal development

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

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

parenting advantage

Create value through management expertise Improve plan and budgets and provide especially competent central functions such as legal, financial, HR, procurement. Help subsidiaries make wise decisions in acquisitions, new internal development decisions.

Which of the following is a firm able to do when it successfully enters a new category with a breakaway product?

It is able to redefine its competition.

Which of the following are potential limitations of mergers and acquisitions? (Check all that apply.)

Managers sometimes acquire companies because of their ego instead of making a sound business decision. There are often many organizational cultural issues that doom any benefits. There is often a high premium for acquiring a company. Competitors can often imitate advantages realized or copy synergies that result from mergers and acquisitions.

golden parachute

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

Which of the following are two requirements for successfully introducing a new product? (Check all that apply.)

an emphasis on research and development an emphasis on marketing activities to create product awareness

Companies that are not able to create a competitive advantage through both cost leadership and differentiation strategies

become stuck in the middle

The ______ stage is the first stage of the industry life cycle.

introduction

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

revenue enhancements cost savings

Firms that sell products in a declining industry are often affected by which of the following competitor actions? (Check all that apply.)

A company's market power may decrease if some of their rivals merge. Sales and profits may increase if one or more competitors exit the industry. Prospects are limited if all competitors remain.

Portfolio Management

A group of companies in growth/share matrix. Strategic business units (SBU) were plotted on two-dimensional scale with relative mkt share and industry growth rate High rel mkt share leads to unit cost reduction due to learning curve effect and consequently superior comp positioning Stars - top left, high growth with high mkt share Question marks - high growth, weak mkt share. need resource investment Cash cows - high mkt share, low growth industry. limited long run potential. present cash flow to fund star and question mark Dogs - weak mkt share, low growth industries. weak position and limited potential should be divested Down sides - only two dimensions, erroneous assumptions, stand-alone entity, ignoring core business practices.

restructuring

Add value to a business through 'buy low and sell high'. Find poorly performing firms with unrealized potential. When restructuring is complete, firm can sell high or capture added value

reverse positioning

Although customers may desire more than the baseline product, they don't necessarily want an endless list of features. Shed product attributes to baseline state. Unconventional combination allows the product to assume new competitive position and move backwards through maturity to growth cycle. Clear category membership

Which of the following is an example of a platform firm?

Amazon

greenmail

Effort to prevent impending takeover. Offers to buy large numbers of stock back from hostile firm at a higher price

Which of the following are pitfalls of using a combination strategy? (Check all that apply.)

Firms may underestimate the challenges and costs associated with coordinating value-creating activities in the extended value chain. Firms may miscalculate sources of revenue and profit pools in their industry. Firms that are not able to attain both strategies may become "stuck in the middle."

Related diversification

Horizontal - diff businesses with diversified corporations Leveraging core competencies and sharing activities Benefit from economies of scale Core competencies - must enhance comp adv by creating superior customer value Different businesses in corp must be similar in at least one important way related to the core competence Must be difficult to imitate

Which of the following are goals of reverse positioning? (Check all that apply.)

Move a product from maturity backward into a growth position. Allow a product to assume a new competitive position in its category.

Revenues grow during the growth stage due to which of the following? (Check all that apply.)

New consumers are purchasing the product. The number of repeat customers is increasing.

Which of the following issues are related to the takeover premium of a merger or acquisition? (Check all that apply.)

Performance hurdles are increased due to the premium price. The premium is often 30% or higher. Two times out of three the acquiring firm's stock price drops once the deal is made public.

______ 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.

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

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

breakaway position

Product escapes category buy and associates itself with a different one. Managers leverage new category to change how product is consumed and who they compete with. Move backwards in life cycle curve as well.

declining stage

Sales begin to fall. Likely due to change in business environment. (customer taste, tech innovation) Consume large management time and financial reources. Competitors can cut prices to raise cash. Dependent on actions of competitors. Maintaining - hopes comp will exit mkt, more secure option Harvesting - obtain max profit via cost reduction Exiting the mkt - dropping a product from portfolio Consolidation - acquiring firms

Unrelated diversification

Sees few benefits in horizontal relationships (leveraging core competencies) Gains from vertical (hierarchical relationships) -- create synergies from corporate office with business units. Parenting/restructuring businesses Viewing the entire corporation as a family/portfolio of businesses

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

Which of the following are limitations with portfolio models like the Boston Consulting Group matrix? (Check all that apply.)

The reliance on "strict rules" regarding resource allocation across business units can be detrimental to a firm's long-term viability. It can lead to troublesome and overly simplistic prescriptions. The symbols themselves (cow, dog, question market, and star) oversimplify a business unit's position in the market.

Which of the following are some problems with using portfolio models? (Check all that apply.)

There is a belief that every business unit can be accurately compared on two dimensions. They compare business units on only two dimensions. The approach views each business unit as a standalone entity that ignores synergy, sharing, etc.

Which of the following are benefits when companies successfully integrate cost and differentiation advantages create an enviable position? (Check all that apply.)

They decrease supplier and buyer power. They decrease industry rivalry. They are able to erect significant barriers to entry.

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

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

True or false: Internal development is often more time-consuming than growing through mergers or acquisitions.

True Building the necessary resources needed to innovate internally often takes more time than working with a firm that already has them.

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 two challenges of the introduction stage of the industry life cycle? (Check all that apply.)

developing the product and finding a way to get users to try it generating enough exposure so the product emerges as the "standard" by which all rivals' products are evaluated NOT decreasing research

Which of the following are characteristics of the industry life cycle's maturity stage? (Check all that apply.)

direct and price competition slowing demand growth and saturated markets strategic emphasis on efficient operations and company exiting industry

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 characteristics of the growth stage? (Check all that apply.)

financing complementary value-chain activities growing competition developing brand recognition increasing sales revenues

One way to increase negotiating power with suppliers is ______.

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

The ______ stage is the second stage of the industry life cycle.

growth

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 leveraging core competencies and sharing activities economies of scope

Which of the following are characteristics of the decline stage of the industry life cycle? (Check all that apply.)

industry consolidation falling sales and profits increasing price competition

Examples of a gasoline retailer gaining economies of scope by going into alternative sources of fueling vehicles include which of the following? (Check all that apply.)

sharing unused space or capacity with another business unit leveraging its purchasing operations with suppliers leveraging its favorable reputation and staff's expertise

Mergers and acquisitions have been especially popular in high-technology and knowledge-based industries, because

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 they help companies to get to market very quickly

poison pills

used by a company to give shareholders certain rights in the event of takeover by another firm