Exam 8: Corporate Strategy

A) the management know-how accumulated in one business is transferable to the other.
B) two businesses present opportunities to economize on marketing, selling, and distribution costs.
C) related diversification produces a synergistic performance outcome.
D) the value chain activities of unrelated businesses possess economies of scope and good financial fit.
E) a company can transfer its brand-name reputation to the products of a newly acquired business and add to the competitive power of the new business.

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A) doing so can result in risk reduction by spreading a company's investments over a set of diverse industries
B) doing so can meet expectations for rapid or continuous growth
C) doing so can stabilize earnings, i.e., market downtrends in some of the company's businesses will be partially offset by cyclical upswings in its other businesses
D) doing so can support managerial motives including the prospects for higher compensation
E) doing so can deliver enhanced shareholder value if an undervalued company can be purchased at a bargain price

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E

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In principle, diversification cannot be ...

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A) Remain on course, but only if your single-business company can achieve profitable growth opportunities in its present industry.
B) A&M needs to develop a corporate-wide strategy.
C) A&M needs to develop a multiline strategy.
D) A&M needs to consider diversification opportunities into financial planning if you have encountered diminishing market opportunities and stagnating sales in your principal business.
E) Remain on course, but only if A&M encounters enhanced market opportunities and increasing sales in its principal business.

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A) revamping the value chains of each of a diversified company's businesses.
B) focusing on restoring the profitability of its money-losing businesses and thereby improving the company's overall profitability.
C) revamping the strategies of its different businesses, especially those that are performing poorly.
D) divesting low-performing businesses that do not fit and acquiring new ones where opportunities are more promising to put a new face on the company's business makeup.
E) broadening the scope of diversification to include a larger number of smaller and more diverse businesses.

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Any approach to diversification is fine ...

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A) broadening the company's business scope by making new acquisitions in new industries
B) increasing dividend payments to shareholders and/or repurchasing shares of the company's stock
C) restructuring the company's business lineup with a combination of divestitures and acquisitions to put a whole new face on the company's business makeup
D) pursuing multinational diversification and striving to globalize the operations of several of the company's business units
E) divesting weak-performing businesses and retrenching to a narrower base of business operations

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A) The first uses a business-level strategy, while the second uses a set of business strategies and a corporate strategy.
B) The first uses a business-level strategy, while the second uses a corporate-wide strategy.
C) The first uses an operating strategy, while the second uses a business-line strategy.
D) The first uses a functional strategy, while the second uses a business-line strategy.
E) The first uses a single-line strategy, while the second uses a multiline strategy.

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A) determining each industry's key success factors, calculating the ability of the company to be successful on each industry KSF, and obtaining overall measures of the firm's ability to compete successfully in each of its industries based on the combined KSF ratings.
B) determining each industry's competitive advantage factors, calculating the ability of the company to be successful on each competitive advantage factor, and obtaining overall measures of the firm's ability to achieve sustainable competitive advantage in each of its industries based on the combined competitive advantage factor ratings.
C) selecting a set of industry attractiveness measures, weighting the importance of each measure, rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to interpret the attractiveness of all the industries, both individually and as a group.
D) rating the attractiveness of each industry's strategic and resource fits, summing the attractiveness scores, and determining whether the overall scores for the industries as a group are appealing or not.
E) identifying each industry's average profitability, rating the difficulty of achieving average profitability in each industry, and deciding whether the company's prospects for above-average profitability are attractive or unattractive, industry by industry.

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A) struggling companies with good turnaround potential, undervalued companies that can be acquired at a bargain price, and companies that have bright growth prospects but are short on investment capital.
B) companies offering the biggest potential to reduce labor costs.
C) cash cow businesses with excellent financial fit.
D) companies that are market leaders in their respective industries.
E) companies that employ the same basic type of competitive strategy as the parent corporation's existing businesses.

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A) Ross has resources or capabilities that are eminently transferable to other related or complementary businesses.
B) Ross's growth is sluggish and it wants the sales and profit boost that a new business can provide.
C) Ross's management wants to lessen the company's vulnerability to seasonal or recessionary influences or to threats from emerging new technologies, legislative regulations, and new product innovations that alter buyer preferences and resource requirements.
D) Ross wants to make new acquisitions to strengthen or complement some of its present businesses, market positioning, and competitive capabilities.
E) Ross's top management wants to increase its compensation.

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A) the difficulties of passing the cost of entry test and the ease with which top managers can make the mistake of diversifying into businesses where competition is too intense.
B) the difficulties of capturing financial fit and having insufficient financial resources to spread business risk across many different lines of business.
C) the demanding managerial requirements and the limited competitive advantage potential due to lack of cross-business strategic fit benefits.
D) ending up with too many cash hog businesses and too much diversity among the competitive strategies of the businesses it has diversified into.
E) the difficulties of achieving economies of scope and conflicts/incompatibility among the competitive strategies of the company's different businesses.

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C

A) multinational diversification
B) restructure the company's business lineup with a combination of divestitures and new acquisitions
C) craft new initiatives designed to build/enhance the reputation and image of the company
D) divest some businesses and retrench to a narrower diversification base
E) broaden the diversification base

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A) is a generalized resource that can be leveraged in unrelated diversification.
B) is a brand name that can steer a narrow assortment of business types.
C) represents a public disclosure spotlighting the corporate image.
D) represents an overall corporate marker covering its overriding image of sustainability and responsibility.
E) is a specialized resource designed to influence profit growth.

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The industry to be entered through diver...

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A) transferring specialized expertise, technological know-how, or other valuable resources and capabilities from one business's value chain to another's
B) cost sharing between businesses by combining their related value chain activities into a single operation
C) overhauling and streamlining the operations of the business by refocusing value chain activities toward businesses that can provide a superior job of parenting
D) exploiting common use of a well-known brand name
E) sharing other resources (besides brands) that support corresponding value chain activities across businesses

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A) the excess cash flows generated by cash cow businesses are sufficient to cover the negative cash flows of its cash hog businesses.
B) a business adequately contributes to achieving the corporate parent's performance targets.
C) the company has adequate financial strength to fund its different businesses and maintain a healthy credit rating.
D) the corporate parent has sufficient cash to fund the needs of its individual businesses and pay dividends to shareholders without having to borrow money.
E) the corporate parent has or can develop sufficient resource strengths and competitive capabilities to be successful in each of the businesses it has diversified into.

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A) picking the new industries to enter and deciding on the means of entry.
B) initiating actions to boost the combined performance of the corporation's collection of businesses.
C) pursuing opportunities to leverage cross-business value chain relationships and strategic fit into competitive advantage.
D) establishing investment priorities and steering corporate resources into the most attractive business units.
E) divesting well-performing businesses.

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E