ASSIGNMENT 8

1.
award:

0.05 out of
0.05 points
Corporate restructuring strategies
involve making radical changes in a diversified company's business lineup, divesting some businesses
and acquiring new ones so as to put a new face on the company's business lineup.
entail reducing the scope of diversification to a smaller number of businesses.
entail selling marginal businesses to free resources for redeployment to the remaining businesses.
focus on crafting initiatives to restore a diversified company's money-losing businesses to profitability.
focus on broadening the scope of diversification to include a larger number of businesses and boost the
company's growth and profitability.

2.
award:

0.05 out of
0.05 points
To produce added long-term shareholder value, a move to diversify into a new business must pass three tests:
_______________________
the capability test, the industry attractiveness test, and the shareholder value test.
the better-off test, the competitive advantage test, and the cost-of-entry test.
the resource fit test, the profitability test, and the shareholder value test.
the shareholder value test, the cost-of-entry test, and the competitive advantage test.
the better-off test, the cost-of-entry test, and the industry attractiveness test.
ebook & resources

3.
award:

0.05 out of
0.05 points
Which of the following makes acquisition an attractive approach to diversifying into another industry?
It is quicker than trying to launch a new operation, offers an effective way to hurdle entry barriers, and
allows the acquirer to move directly to the task of building a strong position in the target industry.
Although it is generally more time-consuming and uncertain, it most likely allows the firm to realize great
profits in the end.

It is less expensive, less risky, and more effective than launching a new start-up operation.
It offers the prospect of gaining an immediate competitive advantage in the new industry.
It satisfies all three diversity tests (industry attractiveness test, cost-of-entry-test, better-off-test) to grow
shareholder value over the long term.
ebook & resources

4.
award:

0.05 out of
0.05 points
Retrenching to a narrower diversification base
is usually the most attractive long-run strategy for a broadly diversified company confronted with
recession, high interest rates, mounting competitive pressures in several of its businesses, and sluggish
growth.
is directed at improving long-term performance by building stronger positions in a smaller number of
core businesses.
is an attractive strategy option for revamping a diverse business lineup that lacks strong cross-business
financial fit.
is sometimes an attractive option for deepening a diversified company's technological expertise and
supporting a faster rate of product innovation.
is a strategy best reserved for companies in poor financial shape.
ebook & resources

5.
award:

0.05 out of
0.05 points
Entering a new business via a joint venture can be useful in which of the following situations?
When the company seeks a long-term commitment and durable business relationship.
When the opportunity is too complex, uneconomical, or risky for one company to pursue alone, a
company needs a local partner to enter a foreign company, and/or a company lacks important resources
or competencies that can be supplied by a partner.
When the target industry is growing fast and is populated with many, relatively small firms.
When adding new production capacity will not adversely impact the supply-demand balance in the
industry.
When the company needs access to economies of scope and good financial fits in order to be costcompetitive.
ebook & resources

6.
award:

0.05 out of
0.05 points

Diversifying into a new industry by forming a new internal subsidiary to enter and compete in the target industry is
attractive when __________________
all of the potential acquisition candidates are losing money.
it is impractical to outsource most of the value chain activities that have to be performed in the target
business/industry.
there is ample time to launch the new business from the ground up.
the company has built up a surplus of cash with which to finance a diversification effort.
none of the companies already in the industry are attractive strategic alliance partners.
ebook & resources

Multiple Choice

7.
award:

0.05 out of
0.05 points
Which of the following best describes economies of scope?
Economies of scope stem from cost-saving efficiencies of operating overseas.
Economies of scope are cost reductions that flow from operating in multiple related businesses.
Economies of scope accrue from a larger operation.
Economies of scope create more value for shareholders than economies of scale do.
Economies of scope arise mainly from strategic fit relationships in the distribution portions of the value
chains of unrelated businesses.
ebook & resources

8.
award:

0.05 out of
0.05 points
Which of the following is a prime benefit of a strategy keyed to related diversification?
Corporate parents created in related diversification can propel the company's business forward and help
them to gain ground over their market rivals.
Related diversification is less capital intensive and usually less risky than unrelated diversification.
Related diversification offers ways for a firm to realize 1 + 1 = 3 benefits because the value chains of the
different businesses present competitively valuable cross-business relationships.
Related diversification leads to competitive advantage and increased profitability.
Related diversification passes the industry attractiveness test and thus offers the best route to 2 + 2 = 4
benefits.
ebook & resources

9.

award:

0.05 out of
0.05 points
Unrelated diversification requires that company managers spend much time and effort screening acquisition
candidates using such criteria as _____________
whether the business can meet corporate targets for profitability and ROI.
whether the business is in an industry with attractive growth potential.
whether the business is big enough to contribute significantly to the parent's firm's bottom line.
None of these are correct.
All of these are correct.

10.
award:

0.05 out of
0.05 points
The drawbacks of an unrelated diversification strategy include ___________
minimal potential for shareholder value creation and financial stability.
limited competitive advantage potential and minimal shareholder value creation.
financial instability and very demanding managerial requirements.
very demanding managerial requirements and limited competitive advantage potential.
cultural conflicts and very demanding managerial requirements.
ebook & resources

11.
award:

0.05 out of
0.05 points
Checking a diversified firm's business portfolio for the competitive advantage potential of cross-business strategic fit
entails consideration of ___________
whether the parent company's competitive advantages are being deployed to maximum advantage in
each of its business units.
whether the competitive strategies employed in each business act to reinforce the competitive power of
the strategies employed in the company's other businesses.
whether the competitive strategies in each business possess good strategic fit with the parent
company's corporate strategy.
the extent to which there are competitively valuable relationships between the value chains of sister
business units and what opportunities they present to reduce costs, share use of a potent brand name,
or transfer skills or technology or intellectual capital from one business to another.

how compatible the competitive strategies of the various sister businesses are and whether these
strategies are properly aimed at achieving the same kind of competitive advantage.
ebook & resources

12.
award:

0.05 out of
0.05 points
The procedure for evaluating a diversified company's strategy involves all of the following steps except
_______________________
checking whether the firm's resources fit the requirements of its present business lineup.
ranking the performance prospects of the various businesses from best to worst and determining what
the corporate parent's priorities should be in allocating resources to its different businesses.
checking the competitive advantage potential of cross-business strategic fit among the company's
various business units.
applying the industry attractiveness test, the cost-of-entry test, and the better-off test.
assessing the competitive strength of each business the company has diversified into and determining
which ones are strong/weak contenders in their respective industries.
ebook & resources

13.
award:

0.05 out of
0.05 points
Evaluating industry attractiveness involves ___________________________________
considering the presence of cross-industry strategic fit.
calculating industry attractiveness scores for each industry into which the company has diversified.
considering whether each industry the company has diversified into represents a good business for the
company to be in.
considering social, political, regulatory, and environmental factors within the industry.
All of the above are correct.
ebook & resources

14.
award:

0.05 out of
0.05 points
Which of the following are key indicators of industry attractiveness?
Social and political factors, strategic fit, and the intensity of competition.
Barriers of entry, overall profitability of the industry, and whether there are only a few major players in
the market.

Emerging opportunities and threats, the presence of cross-industry strategic fit, and seasonal and
cyclical factors.
The existence of economies of scope and whether an industry has significant social, political, regulatory,
and environmental problems.
All of these are correct.
ebook & resources

15.
award:

0.05 out of
0.05 points
What is the benefit of calculating quantitative attractiveness ratings for the industries a diversified company has
invested in?
Attractiveness ratings help to identify the competitively valuable resources and capabilities.
Calculating attractiveness ratings is a systematic and reasonably reliable method for ranking a
diversified company's industries from most to least attractive.
Attractiveness ratings identify which industry has the best/worst value chain matchups from the
standpoint of cost reduction potential.
Attractiveness ratings help to identify the ability to match or beat rivals on key product attributes.
Attractiveness ratings help to identify the opportunities to exercise bargaining leverage with key
suppliers or customers and help identify which industry is likely to be the largest/smallest contributor to
the company's growth and profitability.
ebook & resources

16.
award:

0.05 out of
0.05 points
Relative market share as a measure of competitive strength is calculated by _____________
subtracting the industry-average market share (based on dollar volume) from a company's market share
to determine how much a company's market share is above/below the industry averagethis amount is
a better indicator of a business's competitive strength than is just looking at the firm's market share
percentage.
dividing the business's percentage share of total industry sales volume by the percentage share held by
its largest rivalit is a better indicator of a business's competitive strength than is a simple percentage
measure of market share.
subtracting the company's market share (based on dollar volume) from the industry-average market
share and compared to the main competitors.
dividing the total market volume by the company's sales in order to determine its relative market share.
dividing the business's percentage share of total industry sales volume by the percentage share held by
its five largest rivals.
ebook & resources

17.
award:

0.05 out of
0.05 points

Checking the competitive advantage potential of cross-business strategic fit involves _____________________
evaluating a diversified company's profitability relative to competitors.
examining a company's costs relative to the costs of its chief rivals in the industry.
determining if there are opportunities to exploit outsourcing opportunities by a diversified company's
lineup of businesses.
considering what competitive value can be generated from strategic fit.
evaluating how much benefit a diversified company can gain from cross-business value chain matchups
and resource sharing.
ebook & resources

18.
award:

0 out of
0.05 points
A "cash hog" type of business _______________________

generates cash flows that are too small to fully fund its operations and growth.
has good resource fit with a cash cow business and is essential to a diversified company's lineup of
businesses.
generates cash flows exactly matching the demand for operations and growth.
is always a candidate for divestiture.
generates cash flows over and above its internal requirements.

ebook & resources

19.
award:

0.05 out of
0.05 points
The financial options for allocating a diversified company's financial resources include _______________________
investing in ways to strengthen or grow existing businesses.
making acquisitions to establish positions in new industries or to complement existing businesses.
funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses.
selling competitively weak businesses or businesses in unattractive industries.
repurchasing shares of the company's common stock.
ebook & resources

20.

award:

0.05 out of
0.05 points
Which of the following is not a strategic option for a company that is already diversified?
Sticking closely with the existing business line when the current business line offers attractive growth
opportunities.
Divesting weak-performing businesses and retrenching to a narrower base of business operations.
Broadening the diversification base by adding and acquiring more businesses.
Repurchasing shares of the company's common stock and building cash reserves by investing in shortterm securities.
Restructuring the company's business lineup through a mix of divestitures and new acquisitions.
ebook & resources