Exam 6: Corporate-Level Strategy

During the 1990s top executives of Titanic, Inc., followed a pattern of aggressive acquisitions and diversification. Now, Titanic is performing poorly and earning below average returns. Lusitania, a large conglomerate firm, is in the final stages of purchasing Titanic. Lusitania has announced that it will fire Titanic's current top executives. The Titanic executives may not be worried about their impending job loss if they:

Which of the following resources are more likely to create value in the diversification process?

It can be difficult for investors to actually observe the value created by a firm as it shares activities and transfers core competencies.

In making a decision to diversify, managers should use value-creating reasons or face the risk that their firms will be acquired and they could lose their jobs. Which of the following is a value-creating reason to diversify?

Certain regulatory changes (such as antitrust regulation and tax laws) create incentives or disincentives for diversification that:

Firms use corporate-level diversification strategies for all the following reasons EXCEPT:

If the businesses in the corporate portfolio are not worth more under the management of the corporation than they would be under any other ownership, then the corporate-level strategy has failed.

The curvilinear relationship of corporate performance and diversification indicates that:

The Mars acquisition of the Wrigley assets was part of its related constrained diversification and added market share to the Mars/Wrigley integrated firm. It allowed Mars to gain _______because it could sell its products above the market level or reduce its costs below the market level.

Research shows that increased firm size and greater levels of diversification are correlated with increased executive compensation.

Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare and only two brick plants in the United States make this type of brick. Specialty Steel has decided to buy one of these brick plants. This is an example of:

What is the similarity between high-technology firms and service-based firms that makes them risky as restructuring candidates?

A company pursuing vertical integration can gain market power over its competitors through all of the following EXCEPT:

Describe how diversified firms can use activity sharing and transfer of core competencies to create value.

Synergy exists when:

Acquisitions to increase market power require that the firm have a(n) ____ diversification strategy.

Corporate tax laws, rather than tax laws affecting individuals, have had the most impact on the firm's use of free cash flows for investment in acquisitions.

The use of poison pills increases the chance that a poorly performing firm will be taken over.

Among the value-neutral incentives to diversify, some come from the firm's external environment while others are internal to the firm. External incentives to diversify include:

Managerial motives to seek diversification include a desire to: