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1
INCORRECT
Which one of the following is not one of the elements of crafting corporate
strategy for a diversified company?
A)
Picking the new industries to enter and deciding on the means of entry.
2 CORRECT
Important reasons for a company to consider diversification include
_______________
A)
E)
3
INCORRECT
All of these.
A)
B)
C)
D)
the strategic fit test, the resource fit test, and the profitability test.
the barrier-to-entry test, the growth test, and the shareholder value test.
the attractiveness test, the cost-of-entry test, and the better-off test.
the resource fit test, the strategic fit test, the profitability test, and the
E)shareholder value test.
4
INCORRECT
E)
All of these.
5 CORRECT
Which of the following does not accurately describe entering a new business
via acquisition, internal development, or a joint venture?
The big dilemma of entering an industry via acquisition of an existing
company is whether to pay a premium price for a successful company or
A)to buy a struggling company at a bargain price.
Acquisition is generally the most profitable way to enter a new industry,
tends to be more suitable for an unrelated diversification strategy than a
B)related diversification strategy, and usually requires less capital than
entering an industry via internal start-up.
6 CORRECT
The defining characteristic of related diversification (as opposed to unrelated
diversification) is _______________
that the businesses the company has diversified into are utilizing similar
A)competitive strategies.
that each business the company has diversified into has very similar core
C)competencies and competitive capabilities.
that the company has about the same number of cash cow businesses as
D)it does cash hog businesses.
7 CORRECT
The strategic appeal of related diversification is that _______________
it allows a firm to reap the competitive advantage benefits of skills
transfer, lower costs (due to economies of scope), cross-business use of
A)a powerful brand name, and/or cross-business collaboration in creating
stronger competitive capabilities.
it is less capital intensive than unrelated diversification because related
diversification emphasizes getting into cash cow businesses (as opposed
B)to cash hog businesses).
it involves diversifying into industries having the same kinds of key
C)success factors.
8
INCORRECT
B)
C)
A producer of snow skis and ski boots acquiring a maker of ski apparel
and accessories (outerwear, goggles, gloves and mittens, helmets and
D)toboggans).
E)
9
INCORRECT
stem from cost-saving strategic fits along the value chains of related
C)businesses.
refer to the cost savings that flow from being able to combine the value
D)chains of different businesses into a single value chain.
are like economies of scale and arise from being able to lower costs via a
E)larger volume operation.
10
CORRECT
B)
All of the above; cross-business strategic fits can exist anywhere along
E)the values chains of related businesses.
11
CORRECT
D)
E)
12
INCORRECT
Which one of the following is not part of the task of critiquing a diversified
companys strategy, assessing its business makeup, and deciding how to
improve overall company performance?
Checking whether each business a company has diversified into can pass
the profitability test, the capital gains test, the growth rate test, and the
A)resources test.
B)
13
INCORRECT
14
INCORRECT
C)
D)
E)
15
CORRECT
16
CORRECT
E)
17
CORRECT
18
CORRECT
E)
19
INCORRECT
B)
20
INCORRECT
Step 7:Decide on priorities for resource allocation and whether the general strategic direction for
each business unit should be aggressive expansion, fortify and defend, overhaul and reposition, or
harvest/divest. In doing the ranking, special attention needs to be given to whether and how
corporate resources and capabilities can be used to enhance the competitiveness of particular
business units. Options for allocating a diversified company's financial resources include (1)
investing in ways to strengthen or expand existing businesses, (2) making acquisitions to establish
positions in new industries, (3) funding long-range R&D ventures, (4) paying off existing long-term
debt, (5) increasing dividends, and (6) repurchasing the company's stock. Ideally, a company will
have the financial strength to accomplish what is needed strategically and financially; if not,
strategic uses of corporate resources should usually take precedence.
Step 8:Use the preceding analysis to craft a series of moves to improve overall corporate
performance. Typical actions include (1) making acquisitions, starting new businesses from within,
entering into new strategic alliances, and divesting marginal businesses or businesses that no
longer match the company's long-term direction and strategy; (2) devising moves to strengthen
the long-term competitive positions of the company's businesses; (3) capitalizing on strategic-fit
and resource-fit opportunities and turning them into long-term competitive advantage; and (4)
steering corporate resources out of low-opportunity areas and into high-opportunity areas.