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Exam 6: Corporate-Level Strategy: Creating Value Through Diversification

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Question 1

True/False

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Gillette developed the Fusion and Mach 3 shaving systems that created superior customer value as a result of the company core competency in research and development.

A) True
B) False

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Question 2

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Creating value within business units can happen when the corporate office helps subsidiaries make wise choices in their own acquisitions,divestures,and new ventures.This is known as

A) parenting.
B) restructuring.
C) leveraging core competencies.
D) increasing market power.

E) B) and D)
F) All of the above

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Question 3

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Many acquisitions ultimately result in divestiture.

In 2012,Microsoft admitted to a major _________ mistake when it wrote off essentially the entire 6.2 billion USD it paid for a digital advertising firm,aQuantive,that it purchased in 2007.

A firm should consider vertical integration when

A Cash Cow,in the BCG framework,refers to a business that has

Polaris,a manufacturer of snowmobiles,motorcycles,watercraft,and off-road vehicles,shares manufacturing operations across its businesses.It also has a corporate research and development facility and staff departments that support all of the Polaris operating divisions.This is an example of using

In managing the corporate portfolio,the BCG matrix would suggest that

Sharing activities across business units can provide two primary benefits: cost savings and cost enhancements.

An advantage of mergers and acquisitions is that they can enable a firm to rapidly enter new product markets.

ConAgra uses the related diversification vertical integration initiative to enhance market power.They do this to increase their power over suppliers by centrally purchasing huge quantities of packaging materials for all of its food divisions.

Portfolio models such as the BCG Portfolio matrix are limited in value because they only compare the SBU on four dimensions.

One of the criteria for a core competence is that the different businesses in the corporation must be similar in at least one important way related to the core competence.

At times,the only other people who may have benefited from a merger-acquisition were the shareholders of the acquired firms or the investment bankers advising the acquiring firm.

Corporate-level strategy focuses on

Economies of scope are cost savings from leveraging core competencies or sharing unrelated activities among businesses in a corporation.

Portfolio management should be considered as the primary basis for formulating corporate-level strategies.

Managerial behaviors that erode shareholder returns include egotism,antitakeover tactics and controlled growth.

When firms diversify into unrelated businesses,the primary potential benefits are horizontal relationships,i.e.,businesses sharing tangible and intangible resources.

When Oracle launched a hostile bid for PeopleSoft in 2003,CEO Larry Ellison accused PeopleSoft of launching a poison pill campaign.The outcome of the bitter fight was a better financial reward for PeopleSoft shareholders.