Question 1

Product bundling refers to:

Accepted Answer

A)  preparation of products for shipment. 
B)  a complete package of related products. 
C)  a method of stocking products efficiently. 
D)  an inventory procedure for ensuring effective counting of products. 
E)  a package of unrelated products.

Question 2

Free cash flow is defined as:

Accepted Answer

A)  money in a company's bank account. 
B)  government funds given to a company for meeting Environmental Protection Agency (EP
A)  regulations. 
C)  additional funds donated by stockholders. 
D)  cash amounts that exceed what is required to fund new investments in the company's current business and meet existing debt commitments. 
E)  cash borrowed by the company that requires no interest payments.

Question 3

What would cause a business model based on diversification to lead to a loss of competitive advantage?

Accepted Answer

The answer of What would cause a business model based...

Question 4

The coordination required to realize value from a diversification strategy based on transferring, sharing, or leveraging competencies is a major source of bureaucratic costs.

Accepted Answer

A) True 
 B)False

Question 5

One way a diversified company can increase its profitability is by acquiring inefficient or poorly managed companies and then restructuring them to improve their performance.

Accepted Answer

A) True 
 B)False

Question 6

A company considering entering an industry that is in the mature stage of its life cycle would generally prefer which of the following entry strategies?

Accepted Answer

A)  Joint ventures 
B)  New ventures 
C)  Acquisitions 
D)  Long-term contracting 
E)  Taper integration

Question 7

Differentiate between internal new venture, joint venture and acquisition as a method to enter new industries. Discuss the advantages and disadvantages associated with each.

Accepted Answer

The answer of Differentiate between internal new venture, joint venture...

Question 8

Which of the following is considered a negative effect of sharing the risks and costs of developing a new business in a joint venture?

Accepted Answer

A)  The main risk is that there is rarely an established leading company in an emerging industry. 
B)  If one partner's skills are more important than the other partner's skills, the partner with more valuable skills may feel they might "give away" profits to the other party because of the 50/50 agreement. 
C)  Partners may have different business models or time horizons which can cause conflict about how the business is run. 
D)  There is a risk of giving away important, company-specific knowledge to its partner, which might then use it to compete with its other partner in the future. 
E)  Conflict can sour the working relationship between the partners and cause the venture to disintegrate.

Question 9

If a company wants to enter a market that is developing very quickly and does not have the time to develop the required competencies, internal venturing is a better choice than acquisition.

Accepted Answer

A) True 
 B)False

Question 10

Stanley's services firm wants to enter an embryonic market, but it doesn't have enough cash to purchase the required assets. Which of the following strategies would you recommend to Stanley?

Accepted Answer

A)  Diversify through acquisition. 
B)  Do not diversify at all. 
C)  Diversify with an internal new venture. 
D)  Diversify with a joint venture. 
E)  Diversify through vertical integration.

Question 11

Which of the following statements is NOT generally true of a diversification strategy based on the realization of economies of scope?

Accepted Answer

A)  The strategy requires the head office to evaluate each business unit as a stand-alone operation. 
B)  The strategy allows a company to realize cost economies among business units. 
C)  The strategy may allow a company to use shared resources more intensively, thereby realizing economies of scale. 
D)  The strategy requires managers to be aware of the costs of coordination. 
E)  The strategy requires close coordination among different business units.

Question 12

A strategy based on diversification may fail to add value because companies:

Accepted Answer

A)  seek to achieve differentiation instead of low cost. 
B)  diversify into areas in which they have some knowledge and miss out on profitable opportunities in other areas. 
C)  make acquisitions rather than develop new technologies on their own. 
D)  incur bureaucratic costs that exceed the value created by the strategy. 
E)  seek to achieve a low-cost position instead of differentiation.

Question 13

Which of the following describes when diversification to obtain economies of scope is possible?

Accepted Answer

A)  When there are significant commonalities between one or more value-chain functions in a company's different business units or divisions that result in synergies which increase profitability. 
B)  The sharing of competencies will result in increased costs which will cause a streamlining of one or more of a company's new or existing business units. 
C)  When the advantages of sharing competencies will exceed the costs and risks created. 
D)  Product bundling allows a company to satisfy customers' needs for a complete package of related products but makes it more difficult to achieve economies of scope. 
E)  When the costs of coordination necessary to achieve synergies within a company are higher than the value that can be created by such a strategy.

Question 14

Joint ventures allow frequent and close contact between companies, which facilitates learning and transfer of knowledge, but this advantage can also become a risk if it leads to an unintentional leak of proprietary information across companies.

Accepted Answer

A) True 
 B)False

Question 15

An advantage of unrelated diversification is that competencies can be shared and leveraged throughout the value-chain activities.

Accepted Answer

A) True 
 B)False

Question 16

A company can pursue related diversification to enhance the competitive position of its core business.

Accepted Answer

A) True 
 B)False

Question 17

Which diversification strategy is based on the idea that the company creates value by applying the distinctive competencies it developed in one line of business to another business activity?

Accepted Answer

A)  A technology acquisition strategy 
B)  Related diversification 
C)  A restructuring strategy 
D)  Total diversification 
E)  A taper diversification strategy

Question 18

Which of the following is NOT a reason for the failure of an acquisition to generate the gains originally expected of it?

Accepted Answer

A)  Poor post-acquisition integration 
B)  Overestimation of the potential gains to be derived from synergy 
C)  The high cost of making acquisitions 
D)  Lack of pre-acquisition screening 
E)  Overestimation of the potential costs of realizing synergies

Question 19

A laundromat and a pool hall together invest in a new store, where customers can wash their clothes and play pool while waiting. This is an example of an internal new venture.

Accepted Answer

A) True 
 B)False

Question 20

Disposable diapers, toilet paper, and paper towels, are all paper-based products that customers value for their ability to absorb fluids without disintegrating. P&G's shares the R&D costs associated with developing and making even more advanced absorbent, paper-based products across these three distinct businesses units. They also use the same sales force to sell its whole array of products to retailers. These strategies allow P&G to obtain economies of scope from the ability to share resources and obtain synergies across business units.

Accepted Answer

A) True 
 B)False

Exam 10: Corporate-Level Strategy: Related and Unrelated Diversification

Product bundling refers to:

Free cash flow is defined as:

What would cause a business model based on diversification to lead to a loss of competitive advantage?

The coordination required to realize value from a diversification strategy based on transferring, sharing, or leveraging competencies is a major source of bureaucratic costs.

One way a diversified company can increase its profitability is by acquiring inefficient or poorly managed companies and then restructuring them to improve their performance.

A company considering entering an industry that is in the mature stage of its life cycle would generally prefer which of the following entry strategies?

Differentiate between internal new venture, joint venture and acquisition as a method to enter new industries. Discuss the advantages and disadvantages associated with each.

Which of the following is considered a negative effect of sharing the risks and costs of developing a new business in a joint venture?

If a company wants to enter a market that is developing very quickly and does not have the time to develop the required competencies, internal venturing is a better choice than acquisition.

Stanley's services firm wants to enter an embryonic market, but it doesn't have enough cash to purchase the required assets. Which of the following strategies would you recommend to Stanley?

Which of the following statements is NOT generally true of a diversification strategy based on the realization of economies of scope?

A strategy based on diversification may fail to add value because companies:

Which of the following describes when diversification to obtain economies of scope is possible?

Joint ventures allow frequent and close contact between companies, which facilitates learning and transfer of knowledge, but this advantage can also become a risk if it leads to an unintentional leak of proprietary information across companies.

An advantage of unrelated diversification is that competencies can be shared and leveraged throughout the value-chain activities.

A company can pursue related diversification to enhance the competitive position of its core business.

Which diversification strategy is based on the idea that the company creates value by applying the distinctive competencies it developed in one line of business to another business activity?

Which of the following is NOT a reason for the failure of an acquisition to generate the gains originally expected of it?

A laundromat and a pool hall together invest in a new store, where customers can wash their clothes and play pool while waiting. This is an example of an internal new venture.