Question 1

Reasons for acquisition failure include the effective integration of the acquisition.

Accepted Answer

A) True 
 B)False

Question 2

Among the advantages of acquisitions are the expensive premiums that are frequently paid to acquire a business.

Accepted Answer

A) True 
 B)False

Question 3

In the BCG Growth Share Matrix,the suggested strategy for Stars is to

Accepted Answer

A)   milk them to finance other businesses.
B)   invest large sums to gain a good market share.
C)   maintain position and after the market growth slows use the business to provide cash flow.
D)   not invest in them and to shift cash flow to other businesses.E) C) and D)
F) A) and B)

Question 4

In the BCG Matrix,a business that has a low market share in an industry characterized by high market growth is termed a

Accepted Answer

A)   Star.
B)   Cash Cow.
C)   Question Mark.
D)   Dog.E) A) and D)
F) A) and B)

Question 5

If a multinational firm paid too high a premium for the common stock of the company,this can lead to

Accepted Answer

A)   expansion.
B)   cost savings.
C)   divestiture.
D)   acquisition.E) B) and C)
F) A) and D)

Question 6

The antitakeover tactic,_______,is when a firm offers to buy shares of their stock from a company (or individual) planning to acquire their firm at a higher price than the unfriendly company paid for it.

Accepted Answer

A)   golden parachute
B)   poison pill
C)   greenmail
D)   scorched earthE) A) and B)
F) None of the above

Question 7

Diversification initiatives must be justified by the creation of value for shareholders.

Accepted Answer

A) True 
 B)False

Question 8

An advantage of a firm entering into a strategic alliance is that it does not have to share the wealth with its partners.

Accepted Answer

A) True 
 B)False

Question 9

Starbucks acquired the baker chain,La Boulange,with the intention of selling the bakery products at its coffee cafes.The increased market exposure for La Boulange is an example of a revenue enhancing benefit that can arise from the differentiation strategy.

Accepted Answer

A) True 
 B)False

Question 10

Through joint ventures,firms can directly acquire the assets and competencies of other firms.

Accepted Answer

A) True 
 B)False

Question 11

The Hewlett-Packard and Autonomy merger in 2011 is an example of a successful merger.

Accepted Answer

A) True 
 B)False

Question 12

ConAgra,a diversified food producer,increases its power over suppliers by centrally purchasing huge quantities of packaging materials for all of its food divisions.This is an example of using

Accepted Answer

A)   related diversification to acquire economies of scope by leveraging pooled negotiating power.
B)   related diversification to acquire market power by leveraging pooled negotiating power.
C)   unrelated diversification to acquire financial synergies through portfolio management.
D)   unrelated diversification to acquire parenting, restructuring, and financial synergies through restructuring and parenting.E) B) and C)
F) A) and D)

Question 13

It is not necessary for a core competence to be difficult to imitate or to be non-substitutable.

Accepted Answer

A) True 
 B)False

Question 14

Shaw Industries,a giant carpet manufacturer,increases its control over raw materials by producing much of its own polypropylene fiber,a key input to its manufacturing process.This is an example of using the related diversification vertical integration initiative to enhance their market power.

Accepted Answer

A) True 
 B)False

Question 15

Research shows that the vast majority of acquisitions of public corporations results in value creation rather than value destruction.

Accepted Answer

A) True 
 B)False

Question 16

Firms that choose to diversify through internal development must develop _________ that allow them to move __________ from initial opportunity recognition to market introduction.

Accepted Answer

A)   strategies; slowly
B)   capabilities; quickly
C)   capabilities; slowly
D)   strategies; quicklyE) A) and B)
F) A) and C)

Question 17

Economies of scope in a related diversification strategy result from the leveraging of core competencies and the sharing of activities among businesses in the corporation such as production.

Accepted Answer

A) True 
 B)False

Question 18

The downsides or limitations of mergers and acquisitions include all of the following except:

Accepted Answer

A)   It is a slow means to enter new markets and acquire skills and competences.
B)   Difficulties exist in integrating the activities and resources of the acquired firm into on-going operations.
C)   There can be many cultural issues that can doom an otherwise promising acquisition.
D)   Premiums that are frequently paid to acquire a business are expensive.E) B) and C)
F) B) and D)

Question 19

Sharing core competencies is one of the primary potential advantages of diversification.In order for diversification to be most successful,it is important that the

Accepted Answer

A)   products use similar distribution channels.
B)   similarity required for sharing core competencies must be in the value chain.
C)   target market is the same, even if the products are very different.
D)   methods of production are the same.E) A) and C)
F) All of the above

Question 20

The risks of vertical integration include all of the following except

Accepted Answer

A)   costs and expenses associated with increased overhead and capital expenditures.
B)   lack of control over valuable assets.
C)   problems associated with unbalanced capacities along the value chain.
D)   additional administrative costs associated with managing a more complex set of activities.E) A) and B)
F) All of the above

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

Starbucks acquired the baker chain,La Boulange,with the intention of selling the bakery products at its coffee cafes.The increased market exposure for La Boulange is an example of a revenue enhancing benefit that can arise from the differentiation strategy.

Correct AnswerverifiedShow Answer

Through joint ventures,firms can directly acquire the assets and competencies of other firms.

Correct AnswerverifiedShow Answer

Economies of scope in a related diversification strategy result from the leveraging of core competencies and the sharing of activities among businesses in the corporation such as production.

Correct AnswerverifiedShow Answer

Shaw Industries,a giant carpet manufacturer,increases its control over raw materials by producing much of its own polypropylene fiber,a key input to its manufacturing process.This is an example of using the related diversification vertical integration initiative to enhance their market power.

Correct AnswerverifiedShow Answer

Reasons for acquisition failure include the effective integration of the acquisition.

Correct AnswerverifiedShow Answer

Among the advantages of acquisitions are the expensive premiums that are frequently paid to acquire a business.

Correct AnswerverifiedShow Answer

An advantage of a firm entering into a strategic alliance is that it does not have to share the wealth with its partners.

Correct AnswerverifiedShow Answer

Diversification initiatives must be justified by the creation of value for shareholders.

Correct AnswerverifiedShow Answer

Firms that choose to diversify through internal development must develop _________ that allow them to move __________ from initial opportunity recognition to market introduction.

Correct AnswerverifiedShow Answer

Sharing core competencies is one of the primary potential advantages of diversification.In order for diversification to be most successful,it is important that the

Correct AnswerverifiedShow Answer

The downsides or limitations of mergers and acquisitions include all of the following except:

Correct AnswerverifiedShow Answer

It is not necessary for a core competence to be difficult to imitate or to be non-substitutable.

Correct AnswerverifiedShow Answer

If a multinational firm paid too high a premium for the common stock of the company,this can lead to

Correct AnswerverifiedShow Answer

In the BCG Matrix,a business that has a low market share in an industry characterized by high market growth is termed a

Correct AnswerverifiedShow Answer

The antitakeover tactic,_______,is when a firm offers to buy shares of their stock from a company (or individual) planning to acquire their firm at a higher price than the unfriendly company paid for it.

Correct AnswerverifiedShow Answer

The risks of vertical integration include all of the following except

Correct AnswerverifiedShow Answer

ConAgra,a diversified food producer,increases its power over suppliers by centrally purchasing huge quantities of packaging materials for all of its food divisions.This is an example of using

Correct AnswerverifiedShow Answer

Research shows that the vast majority of acquisitions of public corporations results in value creation rather than value destruction.

Correct AnswerverifiedShow Answer

The Hewlett-Packard and Autonomy merger in 2011 is an example of a successful merger.

Correct AnswerverifiedShow Answer

In the BCG Growth Share Matrix,the suggested strategy for Stars is to

Correct AnswerverifiedShow Answer

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Firms that choose to diversify through internal development must develop _ that allow them to move __ from initial opportunity recognition to market introduction.

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