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mgmt final ch 6

QuestionAnswer
Whenever an organization diversifies, it represents investing a stockholder's funds in a way in which the individual investor is unable. True or false? false
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 cannot. true or false? true
When firms diversify into unrelated businesses, the primary potential benefits are horizontal relationships, i.e. businesses sharing tangible and intangible resources. true or false? false
a newly acquired business must always have products that are similar to the existing businesses' products to benefit from the corporation's core competence. true or false? false
sharing activities across business units can provide two primary benefits: cost savings and revenue enhancements. true or false? true
sharing activities among business units can have a negative effect on a given business's differentiation. true or false? true
market power refers to cost savings from leveraging core competencies or sharing activities among the businesses in a corporation. true or false? false
The two principle means by which firms achieve synergy through market power are: pooled negotiating power and corporate parenting. true or false? false
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 or false? true
a firm that incorporates more processes toward the original source of raw materials is an example of forward integration. true or false? false
a publishing company that purchases a chain of bookstores to sell its books is an example of unrelated diversification. true or false? false
one of the risks of vertical integration is that they may be problems associated with unbalanced capacities or unfilled demands along a firm's value chain. true or false? true
vertical integration should be undertaken when demand for the organization's products is very unstable. true or false? false
market transactions do not involve transaction costs. true or false? false
vertical integration is attractive when market transaction costs are higher than internal admin costs. true or false? true
according to the text, the 2 main sources of synergy is unrelated diversification are parenting and financial synergies via portfolio management. true or false? true
restructuring requires the corporate office to find either poorly performing firms with unrealized potential or firms in industries on the threshold of significant, positive change. true or false? true
portfolio management should be considered as the primary basis for formulating corporate level strategies. true or false? false
portfolio management matrices generally costs of 2 axes that reflect industry or market growth and the market share of a business. true or false? true
the acquisition of 2 or more counter cyclical businesses is an example of using diversification to reduce risk. true or false? true
an advantage of mergers and acquisitions is that the can enable a firm to rapidly enter new product markets. true or false? true
among the disadvantages of acquisitions are the expensive premiums that are frequently paid to acquire a business. true or false? true
through joint ventures, firms can directly acquire the assets and competencies of other firms. true or false? false
the potential advantages of strategic alliances and joint ventures include entering new markets as will as developing and diffusing new technologies. true or false? true
for strategic alliances to be effective, reliance on written contracts to delimit responsibilities and enforce compliance is vital. true or false? false
an advantage of a firm entering into a strategic alliance is that it does not have to share the wealth with is partners. true or false? false
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. true or false? true
in recent years, many high tech firms such as priceline.com have suffered from the negative impact of uncontrolled growth. true or false? true
a golden parachute is prearranged contract with managers specifying that in the event of a hostile takeover, the target firm's managers will be a paid a significant severance package. true or false? true
Corporate level strategy addresses two related issues: what businesses to compete in; how these businesses can achieve synergy
Individual investors are dependent upon the corporation's managers to: add value to their investments in a way that the stockholders could not accomplish on their own
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
Philip Morris bought Miller Brewing and used its marketing expertise to improve Miller's market share. This justification for diversification is best described as: capitalizing on core competencies
The corporate office of Cooper Industries adds value to its acquired businesses by performing such activities as auditing their manufacturing operations, improving their accounting activities, and centralizing union negotiations. This is an example of: attaining the benefits of parenting through unrelated diversification.
reflects the collective learning in organizations such as how to coordinate production skills, integrate multiple streams of technologies, and market and merchandise diverse products and services core competencies
For a core competence to be a viable basis for the corporation strengthening a new business unit there are 3 requirements: must help the business gain strength relative to its competition, new business must be similar to existing business to benefit, collection of competencies should be unique so that they cannot be easily imitated
Sharing core competencies is one of the primary potential advantages of diversification. in order for diversification to be most successful, it is important that: the similarity required for sharing core competencies must be in the value chain, not in the product.
when management uses common production facilities or purchasing procedures to distribute different but related products, they are: sharing activities
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
The risks of vertical integration include: costs and expenses associated with increased overhead and capital expenditures, problems associated with unbalanced capacities along the value chain, additional admin costs associated with managing a more complex set of activities
Unbalanced capacities that limit cost savings, difficulties in combining specializations, and reduced flexibility are disadvantages associated with: vertical integration
a firm should consider vertical integration when: the firm's suppliers of raw materials are often unable to maintain quality standards
It may be advantageous to vertically integrate when: lower transaction costs and improved coordination are vital and achievable through vertical integration
transaction costs include all of the following: search costs, negotiating costs, monitoring costs
vertical integration is attractive when: transaction costs are higher than internal admin costs
when a firm's corporate office helps subsidiaries make wise choices in their own acquisitions, divestures, and new ventures parenting
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
according to the text, corporate restructuring includes: capital restructuring, asset restructuring, and management restructuring
portfolio management matrices are applied to what level of strategy? corporate level
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: star
in the BCG matrix, a business that has a low market share in an industry characterized by a higg market growth is termed a: question mark
portfolio management frameworks share what characteristics? grid dimensions are based on external environments and internal capabilities/market positions
a cash cow referred to in the BCG, refers to a business that has low market growth and relatively high market share
In managing a firm's portfolio, the BCG matrix would suggest that: question marks can represent future stars if their market share increased
In the BCG matrix, the suggested strategy for stars is to: maintain position and after the market growth slows use the business to provide cash flow
limitations of the BCG every business cannot be accurately measured and compared on 2 dimensions, views each business as a stand alone entity and ignores the potential for synergies, can lead to some troublesome and overly prescriptions
the 3 primary means by which a firm can diversify are: mergers and acquisitions, joint ventures and strategic alliances, internal development
The downsides or limitations of mergers and acquisitions include expensive premiums that are frequently paid to acquire a business, difficulties in integrating the activities and resources of the acquired firm, many cultural issues that can doom an otherwise promising acquistion
divesting business can accomplish many different objectives. this includes: enabling managers to focus their efforts to more directly on the firm's core businesses, providing the firm with more resources to spend on more attractive alternatives, raising cash to help fund existing businesses
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
Cooperative relationships such as this have the potential advantages such as entering new markets, reducing manufacturing costs in the value chain, and developing and diffusing new technologies joint ventures and strategic alliances
guidelines for managing strategic alliances establishing a clear understanding between partners, not shortchanging your partner, working hard to ensure a collaborative relationship between partners
according to michael porter: there's a tremendous allure to ____. its the big play, the dramatic gesture. with one stroke of the pen you can add billions to size, get a front page store, and create excitement in markets. mergers and acquisitions
an antitakeover called _____ is when a firm offers to buy shares of their stock from a company planning to acquire their firm at a higher price than the unfriendly company paid for it greenmail
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 a poison pill
the term golden parachute refers to pay given to executives fired because of a takeover
antitakeover tactics include greenmail, golden parachutes, poison pills
Created by: Courteney Roten Courteney Roten on 2011-12-11



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