Exam 8: Corporate Strategy

A) each business is a cash cow.
B) its businesses add to a company's overall resource strengths and have matching resource requirements and/or when the parent has adequate corporate resources to support its business needs and add value.
C) each business is sufficiently profitable to generate an attractive return on invested capital.
D) each business unit produces large internal cash flows over and above what is needed to build and maintain the business.
E) the resource requirements of each business exactly match the company's available resources.

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A) the lower the attractiveness weighting for that industry.
B) the higher the attractiveness weighting for that industry.
C) suggests the resources are beyond the parent company's reach.
D) suggests the industry attractiveness measures have been incorrectly weighted.
E) the more likely the company's profit and revenues will be intensive.

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A) is useful for helping decide which businesses should have high, average, and low priorities in deploying corporate resources.
B) indicates which businesses are cash hogs and which are cash cows.
C) pinpoints what strategies are most appropriate for businesses positioned in the three top cells of the matrix, but is less clear about the best strategies for businesses positioned in the bottom six cells.
D) identifies which sister businesses have the greatest strategic fit.
E) identifies which sister businesses have the highest level of resource fit.

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A) underemphasizing the importance of resource fit and the strong likelihood of diversifying into businesses that top management does not know all that much about.
B) insufficient cash flows to finance so many different lines of business and a lack of uniformity among the strategies of the businesses it has diversified into.
C) volatile sales and profits and making the mistake of diversifying into too many cash cow businesses.
D) the difficulties of competently managing many different businesses and being without the added source of competitive advantage that cross-business strategic fit provides.
E) over-investing in the achievement of economies of scope and the difficulties of achieving a good mix of cash cow and cash hog businesses.

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A) is an effective way to hurdle entry barriers, is usually quicker than trying to launch a brand-new startup operation, and allows the acquirer to move directly to the task of building a strong position in the target industry.
B) is less expensive than launching a new startup operation, thus passing the cost-of-entry test.
C) offers a challenging opportunity to train new resources and revive a sagging business even if does not offer great prospects for growth, profitability, or return on investment.
D) is more likely to result in passing the shareholder value test, the profitability test, and the better-off test.
E) offers the prospect of gaining an immediate competitive advantage in the new industry and thus helps ensure that the diversification move will pass the competitive advantage test for building shareholder value.

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A) identifying which businesses have large/small competitive advantages or competitive disadvantages vis-à-vis the rivals in their respective industries.
B) rating them from strongest to weakest in terms of contributing to the corporate parent's revenue growth.
C) comparing resource strengths and weaknesses, business by business.
D) rating them from strongest to weakest in contending for market leadership in their respective industries.
E) rating them from strongest to weakest in terms of contributing to the corporate parent's profitability.

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A) making acquisitions to establish positions in new businesses or to complement existing businesses.
B) investing in ways to strengthen or grow existing businesses.
C) funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses.
D) paying off existing debt and building cash reserves,.
E) .decreasing dividend payments and/or selling shares of stock.

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A) outsourcing most of the value chain activities that have to be performed in the target business/industry.
B) acquiring a company already operating in the target industry, creating a new business from scratch, or forming a joint venture with one or more companies to enter the target industry.
C) integrating forward or backward into the target industry.
D) shifting from a strategic group comprised mostly of single-business companies to a strategic group comprised of diversified companies.
E) employing an offensive strategy with new product innovation as its centerpiece.

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A) is more able than other companies to boost the combined performance of its individual businesses through its high-level guidance, general oversight, and other corporate-level contributions.
B) is more able than other companies to create positive collaboration within its portfolio for different specialty groups and geographic locations.
C) results in supporting short-term economic shareholder value.
D) manages a set of fundamentally similar business operations inside fundamentally similar industries and environments.
E) avoids acquiring undervalued companies and thus reduces risks.

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A) building brand awareness.
B) avoiding the costs of doing due diligence.
C) achieving scale economies.
D) establishing supplier relationships.
E) acquiring technical know-how.

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A) Assessing the competitive strength of each business the company has diversified into
B) Determining which business units are cash cows and which ones are cash hogs, and then evaluating how soon the company's cash hogs can be transformed into cash cows
C) Evaluating the strategic fits and resource fits among the various sister businesses
D) Assessing the attractiveness of the industries the company has diversified into, both individually and as a group
E) Ranking the performance prospects of the businesses from best to worst and deciding what priority to give each of the company's business units in allocating resources

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Once a diversified company's strategy ha...

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Calculating quantitative industry attrac...

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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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A) to combine the performance of certain cross-business activities and thereby reduce costs.
B) to transfer skills, technology, or intellectual capital from one business to another.
C) for the company's different businesses to share use of a well-respected brand name.
D) for sister businesses to collaborate in creating valuable new competitive capabilities.
E) to create a positive image in the industry irrespective of the financial performance of its businesses.

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A) Scale refers to the magnitude or size of the operation, while scope refers to the reach of defined savings within the value chain.
B) Scale refers to the extent of change, while scope refers to the possibilities of change.
C) Scale is about dimensions, while scope is about the capacity available for production capabilities.
D) Scale refers to cost savings that accrue directly from larger-sized operations, while scope stems directly from strategic fit along the value chains of related businesses.
E) Scale and scope mean the same thing and the only difference is the extent of cost savings accrued from unrelated businesses in each.

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A) diversify into businesses that can produce consistently good earnings and returns on investment and thereby satisfy the attractiveness test.
B) negotiate favorable acquisition prices (to satisfy the cost-of-entry test) .
C) do a superior job of corporate parenting via high-level managerial oversight and resource sharing, financial resource allocation and portfolio management, or restructuring underperforming businesses (to satisfy the better-off test) .
D) satisfy the attractiveness test, the cost-of-entry test, and the better-off test.
E) leverage the cross-business strategic fit advantage effectively

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A) Market size and projected growth rate, industry profitability, and the intensity of competition
B) Industry uncertainty and business risk
C) The frequency with which strategic alliances and collaborative partnerships are used in each industry, and the extent to which firms in the industry utilize outsourcing
D) Resource requirements, and whether an industry has significant social, political, regulatory, and environmental problems
E) The presence of cross-industry strategic fits and matching resource requirements to the parent company

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