Question 1

Diversification initiatives must be justified by the creation of value for shareholders.

Accepted Answer

A) True 
 B)False

Question 2

Unbalanced capacities that limit cost savings,difficulties in combining specializations,and reduced flexibility are disadvantages associated with

Accepted Answer

A)  strategic alliances.
B)  vertical integration.
C)  horizontal integration.
D)  divestiture.E) C) and D)
F) None of the above

Question 3

Divesting of businesses can accomplish many different objectives,except

Accepted Answer

A)  enabling managers to focus their efforts more directly on the core businesses of the firm.
B)  providing the firm with more resources to spend on more attractive alternatives.
C)  raising cash to help fund existing businesses.
D)  dispersing manager focus.E) A) and C)
F) A) and B)

Question 4

The Hewlett-Packard and Autonomy merger in 2011 is an example of a successful merger.

Accepted Answer

A) True 
 B)False

Question 5

For a core competency to create value and provide a viable basis for synergy among the businesses in a corporation,it must at least create superior customer value and it must be difficult to imitate.

Accepted Answer

A) True 
 B)False

Question 6

Vertical integration is attractive when

Accepted Answer

A)  administrative costs are higher than transaction costs.
B)  transaction costs are higher than administrative costs.
C)  transaction costs and administrative costs are equal.
D)  search costs are higher than monitoring costs.E) A) and B)
F) All of the above

Question 7

Discuss the three basic means by which a firm can go about achieving synergy and create value for its shareholders.

Accepted Answer

Feedback: There are three basic means.Fi...

Question 8

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

Accepted Answer

A)  related diversification to acquire market power by pooling negotiating power.
B)  related diversification to acquire economies of scope by leveraging core competencies.
C)  related diversification to acquire market power by integrating vertically.
D)  related diversification to acquire economies of scope by integrating vertically to acquire market power.E) None of the above
F) B) and C)

Question 9

The corporate office of Novartis,formerly Ciba-Geigy,acts to improve many key activities,including resource allocation and reward and evaluation systems.This is an example of creating value by using

Accepted Answer

A)  related diversification to achieve value by leveraging pooled negotiating power to attain economies of scope.
B)  unrelated diversification to acquire financial synergies through portfolio management.
C)  related diversification to acquire market power by leveraging pooled negotiating power.
D)  related diversification to acquire parenting synergies through corporate restructuring and parenting.E) B) and D)
F) B) and C)

Question 10

Discuss and explain the three criteria that a core competence must meet if it is to create value and to provide a viable basis for synergy among the businesses in a corporation.

Accepted Answer

Feedback: For a core competence to creat...

Question 11

The primary means by which a firm can diversify are ________,________,and ________.

Accepted Answer

A)  mergers and acquisitions;differentiation;overall cost leadership
B)  mergers and acquisitions;joint ventures and strategic alliances;internal development
C)  joint ventures and strategic alliances;integration of value chain activities;acquiring human capital
D)  mergers and acquisitions;internal development;differentiationE) B) and D)
F) A) and B)

Question 12

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

Accepted Answer

A)  vertical integration.
B)  sharing activities.
C)  pooled negotiating power.
D)  leveraging core competencies.E) A) and B)
F) A) and C)

Question 13

Diversified public corporations,such as Berkshire Hathaway and Virgin Group,create value through management expertise by improving plans and budgets.This is an example of a related diversification strategy.

Accepted Answer

A) True 
 B)False

Question 14

A disadvantage of mergers and acquisitions is that they can enable a firm to rapidly enter new product markets.

Accepted Answer

A) True 
 B)False

Question 15

Research shows that most acquisitions of public corporations result in value creation rather than value destruction.

Accepted Answer

A) True 
 B)False

Question 16

At Cooper Industries,there are few similarities in the products it makes or the industries in which it completes.The corporate office adds value through such activities as improving their accounting activities and centralizing union negotiations.This is an example of creating value by using

Accepted Answer

A)  related diversification to acquire economies of scope by leveraging pooled negotiating power.
B)  related diversification to acquire market power by leveraging core competencies.
C)  unrelated diversification to acquire financial synergies through portfolio management.
D)  unrelated diversification to acquire synergies through corporate restructuring and parenting.E) B) and C)
F) A) and B)

Question 17

An acquisition that results in ________ commonly indicates that expectations were not met.

Accepted Answer

A)  expansion
B)  divestiture
C)  cost savings
D)  increased salesE) C) and D)
F) A) and D)

Question 18

Which of the following is not a downside of portfolio models used to assist a firm in balancing its portfolio of businesses?

Accepted Answer

A)  Portfolio models compare SBUs on only two dimensions under the assumption that these are the only factors that matter.
B)  Portfolio models view each SBU as a stand-alone entity.
C)  Portfolio models rely on loose rules regarding resource allocation across the SBUs.
D)  The evaluation process risks becoming mechanical and oversimplified.E) A) and B)
F) A) and D)

Question 19

Gillette developed the Fusion and Mach 3 shaving systems.These products created superior customer value as a result of the company core competency in research and development.

Accepted Answer

A) True 
 B)False

Question 20

Capital restructuring involves changing the ________ mix.

Accepted Answer

A)  cash
B)  human resource
C)  debt-equity
D)  managementE) All of the above
F) C) and D)

Exam 6: Corporate-Level Strategy: Creating Value Through Diversification

For a core competency to create value and provide a viable basis for synergy among the businesses in a corporation,it must at least create superior customer value and it must be difficult to imitate.

Correct AnswerverifiedShow Answer

The primary means by which a firm can diversify are ________,________,and ________.

Correct AnswerverifiedShow Answer

Discuss the three basic means by which a firm can go about achieving synergy and create value for its shareholders.

Correct AnswerverifiedFeedback: There are three basic means.Fi...View AnswerShow Answer

A disadvantage of mergers and acquisitions is that they can enable a firm to rapidly enter new product markets.

Correct AnswerverifiedShow Answer

Diversified public corporations,such as Berkshire Hathaway and Virgin Group,create value through management expertise by improving plans and budgets.This is an example of a related diversification strategy.

Correct AnswerverifiedShow Answer

At Cooper Industries,there are few similarities in the products it makes or the industries in which it completes.The corporate office adds value through such activities as improving their accounting activities and centralizing union negotiations.This is an example of creating value by using

Correct AnswerverifiedShow Answer

Unbalanced capacities that limit cost savings,difficulties in combining specializations,and reduced flexibility are disadvantages associated with

Correct AnswerverifiedShow Answer

Capital restructuring involves changing the ________ mix.

Correct AnswerverifiedShow Answer

Divesting of businesses can accomplish many different objectives,except

Correct AnswerverifiedShow Answer

An acquisition that results in ________ commonly indicates that expectations were not met.

Correct AnswerverifiedShow Answer

Research shows that most acquisitions of public corporations result in value creation rather than value destruction.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Gillette developed the Fusion and Mach 3 shaving systems.These products created superior customer value as a result of the company core competency in research and development.

Correct AnswerverifiedShow Answer

Discuss and explain the three criteria that a core competence must meet if it is to create value and to provide a viable basis for synergy among the businesses in a corporation.

Correct AnswerverifiedFeedback: For a core competence to creat...View AnswerShow Answer

Which of the following is not a downside of portfolio models used to assist a firm in balancing its portfolio of businesses?

Correct AnswerverifiedShow Answer

The Hewlett-Packard and Autonomy merger in 2011 is an example of a successful merger.

Correct AnswerverifiedShow Answer

The corporate office of Novartis,formerly Ciba-Geigy,acts to improve many key activities,including resource allocation and reward and evaluation systems.This is an example of creating value by using

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Diversification initiatives must be justified by the creation of value for shareholders.

Correct AnswerverifiedShow Answer

Vertical integration is attractive when

Correct AnswerverifiedShow Answer

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