MGMT 497 Chapter 8

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1

The top-level executive task of crafting a diversified company's overall or corporate strategy includes which one of the following?

Evaluating the growth and profitability prospects for each business and then investing aggressively in the most promising businesses with the best prospects, investing cautiously in businesses with just average prospects, and divesting businesses with unacceptable prospects

2

Once a company has diversified into a collection of related or unrelated businesses and concludes that some strategy adjustments are needed, which one of the following is NOT one of the main strategy options that a company can pursue?

Have all of the company's businesses operate under a common brand name and craft new initiatives to build/enhance the reputation of this brand name worldwide

3

Which of the following are negatives or disadvantages of pursuing unrelated diversification strategies?

No potential for competitive advantage beyond any benefits of corporate parenting and what each individual business can generate on its own

4

Which of the following is the best example of unrelated diversification?

A producer of men's apparel acquiring a maker of golf equipment.

5

Businesses are said to be "related" when

they possess competitively valuable cross-business value-chain matchups.

6

What makes related diversification an attractive strategy is

the opportunity to convert cross-business strategic fits into a competitive advantage over business rivals whose operations do not offer comparable strategic-fit benefits.

7

A diversified company's business units exhibit good resource fit when

a company has the resources to adequately support the requirements of its entire group of businesses without spreading itself too thin and when individual businesses add to a company's overall resource strengths.

8

The chief purpose of calculating quantitative industry attractiveness scores for each industry a company has diversified into is to

help determine (1) whether each industry the company has diversified into represents a good business for the company to be in, (2) which of the company's industries are most attractive and which are least attractive, and (3) the overall appeal of the whole group of industries in which the company has invested.

9

Which of the following best illustrates an economy of scope?

Being able to eliminate or reduce costs by combining related value-chain activities of different businesses into a single operation

10

Which of the following is not part of the procedure for evaluating the pluses and minuses of a diversified company's strategy and deciding what actions to take to improve the company's performance?

Conducting a SWOT analysis of each business the company has diversified into

11

Different businesses are said to be "unrelated" when

they have dissimilar value chains, containing no competitively useful cross-business relationships or strategic fits.

12

Which one of the following is not among the conditions that make restructuring a diversified company's business lineup an appealing strategic option?

When the company lacks a strong global brand name and lacks the managerial know-how and technological expertise needed to achieve economies of scope

13

Based on the information presented in Figure 8.1, which of the following would not be something to look for in identifying a diversified company's strategy?

The competitive strategy each business is employing to try to build a competitive advantage over rivals

14

Strategic fit between two or more businesses exists whenever one or more activities comprising the value chains of different businesses are sufficiently similar to present opportunities

for cross-business use of a potent brand name and/or cross-business collaboration to build new or stronger competitive capabilities

15

A “cash hog” type of business

is one that generates cash flows that are too small to fully fund its operations and growth--such businesses require periodic cash infusions by the corporate parent to fund internal operations and finance capital requirements.

16

The nine-cell attractiveness–strength matrix provides strong logic for

fully funding the resource needs of competitively strong businesses in attractive industries, investing selectively in businesses with intermediate position on the grid, and getting rid of competitively weak businesses in unattractive industries unless they generate sizable cash flows that can be redeployed elsewhere.

17

Creating added long-term value for shareholders via diversification requires

building a multi-business company where the whole is greater than the sum of its parts--such 1 + 1 = 3 effects are called synergy.

18

Which one of the following is NOT something that corporate executives must do to succeed in using a strategy of unrelated diversification to produce companywide financial results above and beyond what the businesses could generate operating as stand-alone entities?

Be shrewd in identifying opportunities to acquire businesses that possess exceptionally good resource fits and/or that can significantly boost sales and market share by incorporating use of the parent company's technological expertise

19

Diversification becomes a prime strategic option in all but which one of the following situations?

When a company has more resource deficiencies than resource strengths in its principal business

20

The value of determining the relative competitive strength of each business a company has diversified into is

to have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries.