بسم
الله الرحمن الرحيم
Salam to
whom might be reading this entry right now..of course la if I’m writing in
English, the topic would be on darling strategic management.hehe..today I’ll
review on corporate strategy: diversification n
the multibusiness company. But in a Q&A format..correct
answers given under but try to answer first before u look at the answers given
ok..have fun answering dear all.
1. The task of crafting corporate
strategy for a diversified company encompasses is:
A. picking the new industries to enter and deciding
on the means of entry.
B. initiating actions to boost the combined
performance of the businesses the firm entered.
C. pursuing opportunities to leverage cross-business
value chain relationships and strategic fits into competitive advantage.
D. establishing investment priorities and steering
corporate resources into the most attractive business units.
E. All of these.
2. Diversification becomes a relevant
strategic option when a company:
A. spots opportunities to expand into industries
whose technologies and products complement its present business.
B. can leverage existing competencies and
capabilities by expanding into industries where these same resource strengths
are key success factors and valuable competitive assets.
C. has a powerful and well-known brand name that can
be transferred to the products of other businesses and thereby used as a lever
for driving up the sales and profits
D. can open up new avenues for reducing costs by
diversifying into closely related businesses
E. All of these.
3. The three tests for judging whether a
particular diversification move can create value for shareholders are
A. the attractiveness test, the profitability test,
and the shareholder value test.
B. the strategic fit test, the competitive advantage
test, and the return on investment test.
C. the resource fit test, the profitability test, and
the shareholder value test.
D. the attractiveness test, the cost-of-entry test,
and the better-off test.
E. the shareholder value test, the cost-of-entry
test, and the profitability test.
4. The cost-of-entry test for
evaluating whether diversification into a particular industry is likely to
build shareholder value involves:
A. determining whether a newly entered business
presents opportunities to cost-efficiently transfer competitively valuable
skills or technology from one business to another.
B. determining whether the cost to enter the target
industry will strain the company’s credit rating.
C. considering whether a company’s costs to enter the
target industry are low enough to allow for good profits or so high that
potential profits would be eroded.
D. determining whether the cost to enter the target
industry will raise or lower the company’s total profits.
E. determining whether the cost a company incurs to
enter the target industry will raise or lower production costs.
5. The better-off test for evaluating
whether a particular diversification move is likely to generate added value for
shareholders involves:
A. assessing whether the diversification move will
make the company better off because it will produce a greater number of core
competencies.
B. assessing whether the diversification move will
make the company better off by improving its balance sheet strength and credit
rating.
C. assessing whether the diversification move will
make the company better off by spreading shareholder risks across a greater
number of businesses and industries.
D. evaluating whether the diversification move will
produce a 1 + 1 = 3 outcome such that the company’s different businesses
perform better together than apart and the whole ends up being greater than the
sum of the parts.
E. assessing whether the diversification move will
benefit shareholders due to gains in earnings per share and faster stock price
appreciation.
6. Acquisition of an existing business
is an attractive strategy option for entering a promising new industry because
it is:
A. an effective way to hurdle entry barriers, is
usually quicker than trying to launch a brand-new start-up operation, and
allows the acquirer to move directly to the task of building a strong position
in the target industry.
B. less expensive than launching a new start-up
operation, thus passing the cost-of-entry test.
C. is a less risky way of passing the attractiveness
test.
D. is more likely to result in passing the
shareholder value test, the profitability test, and the better-off test.
E. offers the prospect of gaining an immediate
competitive advantage in the new industry thus ensure that the diversification
move will pass the competitive advantage test for building shareholder value.
7. Which one of the following is not a
factor that makes it appealing to diversify into a new industry by forming an
internal start-up subsidiary to enter and compete in the target industry?
A. When internal entry is cheaper than entry via
acquisition.
B. When a company possesses the skills and resources
to overcome entry barriers and there is ample time to launch the business and
compete effectively.
C. When adding new production capacity will not
adversely impact the supply demand balance in the industry by creating
oversupply conditions.
D. When the industry is growing rapidly and the
target industry is comprised of several relatively large and well-established
firms.
E. When incumbent firms are likely to be slow or
ineffective in combating a new entrant’s efforts to crack the market.
8. A joint venture is an attractive way
for a company to enter a new industry when:
A. the pool of attractive acquisition candidates in
the target industry is relatively small.
B. it needs better access to economies of scope in
order to be cost-competitive.
C. the industry is growing slowly and adding too much
capacity too soon could create oversupply conditions.
D. the firm has no prior experience with
diversification and the industry is on the verge of explosive growth.
E. the opportunity is too risky or complex for a
company to pursue alone, a company lacks some important resources or
competencies and needs a partner to supply them, and/or a company needs a local
partner in order to enter a desirable business in a foreign country.
9. Which of the following is an important appeal of a related
diversification strategy?
A. Related diversification is an effective way of
capturing valuable financial fit benefits.
B. Related diversification offers more competitive
advantage potential than does unrelated diversification.
C. Related diversification offers significant
opportunities to strongly differentiate a company’s product offerings from
those of rivals.
D. Related diversification is more likely to pass the
cost-of-entry test and the capital gains test than unrelated diversification.
E. Related diversification is typically more
profitable than unrelated diversification, which is a major factor in helping
related diversification pass the attractiveness test.
10. Strategic fit between two or more
businesses exists when one or more activities comprising their respective value
chains present opportunities
A. to transfer expertise or technology or
capabilities from one business to another.
B. for cross-business use of a common brand name.
C. to lower costs by combining the performance of the
related value chain activities of different businesses.
D. for cross-business collaboration to build valuable
new resource strengths and competitive capabilities.
E. All of these.
11. What makes related diversification
an attractive strategy is:
A. the ability to broaden the company’s product line.
B. the opportunity to convert cross-business
strategic fits into competitive advantages over business rivals whose
operations don’t offer comparable strategic fit benefits.
C. the potential for improving the stability of the
company’s financial performance.
D. the ability to serve a broader spectrum of buyer
needs.
E. the added capability it provides in overcoming the
barriers to entering foreign markets.
12. Economies of scope:
A. are cost reductions that flow from operating in
multiple related businesses.
B. arise only from strategic fit relationships in the
production portions of the value chains of sister businesses.
C. are more associated with unrelated diversification
than related diversification.
D. are present whenever diversification satisfies the
attractiveness test and the cost-of-entry test.
E. arise mainly from strategic fit relationships in
the distribution portions of the value chains of unrelated businesses.
13. A strategy of diversifying into
unrelated businesses:
A. is aimed at achieving good financial fit (whereas
related diversification aims at good strategic fit).
B. is the best way for a company to pass the
attractiveness test in choosing which types of businesses industries to enter.
C. discounts the importance of strategic fit benefits
and instead focuses on building and managing a group of businesses capable of
delivering good financial performance irrespective of the industries these
businesses are in.
D. concentrates on diversifying into businesses where
a company can leverage use of a well-known brand name in ways that create added
value for shareholders.
E. generally offers more competitive advantage
potential than related diversification.
14. With an unrelated diversification
strategy, the types of companies that make particularly acquisition targets
are:
A. struggling companies with good turnaround
potential, undervalued companies that can be acquired at a bargain price, and
companies that have bright growth prospects but are short on investment
capital.
B. companies offering the biggest potential to reduce
labor costs.
C. cash cow businesses with excellent financial fit.
D. companies that are market leaders in their
respective industries.
E. companies that are employing the same basic type
of competitive strategy as the parent corporation’s existing businesses.
15. The procedure for evaluating the
pluses and minuses of a diversified company’s strategy includes
A. assessing the attractiveness of the industries the
company has diversified into.
B. assessing the competitive strength of each
business the company has diversified into to see which ones are the
strongest/weakest contenders in their respective industries.
C. ranking the performance prospects of the various
businesses from best to worst and determining the priorities for resource
allocation.
D. checking the competitive advantage potential of
cross-business strategic fits and also checking whether the firm’s resources
fit the needs of its present business lineup.
E. All of these.
16. Assessments of how a diversified
company’s subsidiaries compare in competitive strength should be based on such
factors as:
A. vulnerability to seasonal and cyclical downturns,
vulnerability to driving forces, and vulnerability to fluctuating interest
rates and exchange rates.
B. relative market share, ability to match or beat
rivals on key product attributes, brand image and reputation, costs relative to
competitors, and ability to benefit from strategic fits with sister businesses.
C. the appeal of its strategy, relative number of
competitive capabilities, the number of products in each businesses product
line, which businesses have the highest/lowest market shares, and which
businesses earn the highest/lowest profits before taxes.
D. the ability to hurdle barriers to entry, value
chain attractiveness, and business risk.
E. cost reduction potential, customer satisfaction
potential, and comparisons of annual cash flows from operations.
17. Checking a diversified firm’s
business portfolio for the competitive advantage potential of cross-business
strategic fits entails consideration of:
A. whether the parent’s company’s competitive
advantages are being deployed to maximum advantage in each of its business
units.
B. whether the competitive strategies employed in each
business act to reinforce the competitive power of the strategies employed in
the company’s other businesses.
C. whether the competitive strategies in each
business possess good strategic fit with the parent company’s corporate
strategy.
D. 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, create competitively valuable new capabilities via cross-business
collaboration, or transfer skills or technology or intellectual capital from
one business to another.
E. 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.
18. A “cash cow” type of business:
A. generates unusually high profits and returns on
equity investment.
B. is so profitable that it has no long-term debt.
C. generates positive cash flows over and above its
internal requirements, thus providing a corporate parent with cash flows that
can be used for financing new acquisitions, investing in cash hog businesses,
and/or paying dividends.
D. is a business with such a strong competitive
advantage that it generates big profits, big returns on investment, and big
cash surpluses after dividends are paid.
E. has good strategic fit with a cash hog business.
19. Corporate strategy options for
diversified companies include
A. broadening the company’s business scope by making
new acquisitions in new industries.
B. divesting weak-performing businesses and
retrenching to a narrower base of business operations.
C. restructuring the company’s business lineup with a
combination of divestitures and new acquisitions to put a whole new face on the
company’s business makeup.
D. pursuing growth opportunities within the existing
business lineup.
E. All of these.
20.Corporate restructuring strategies:
A. 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.
B. entails reducing the scope of diversification to a
smaller number of businesses.
C. entail selling off marginal businesses to free up
resources for redeployment to the remaining businesses.
D. focus on crafting initiatives to restore a
diversified company’s money-losing businesses to profitability.
E. focus on broadening the scope of diversification
to include a larger number of businesses and boost the company’s growth and
profitability.
ANSWERS: EEDCE ADEBE BACAE BCCEA
MAY ALLAH BLESS US ALL TODAY AND ALWAYZ
