Question 1

What are the two general types of diversification and when would one be preferred over the other?

Accepted Answer

The answer of What are the two general types of...

Question 2

In 2007, Google bought YouTube. This is an example of which of the following?

Accepted Answer

A)  Partnership 
B)  Strategic alliance 
C)  Joint venture 
D)  Acquisition 
E)  Merger

Question 3

New ventures:

Accepted Answer

A)  should be killed if they don't make a profit within three years. 
B)  are often preferred by technology-based companies. 
C)  are more attractive compared to acquisitions when entry barriers are high. 
D)  are less risky than acquisitions. 
E)  are best when the company is entering the industry on a small scale.

Question 4

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 5

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 in excess of that required to fund investments in the company's industry and to meet any debt commitments. 
E)  cash borrowed by the company that requires no interest payments.

Question 6

What is perhaps the most important reason why acquisitions fail?

Accepted Answer

A)  The expense of the acquisition 
B)  The timing of the acquisition 
C)  Management's unwillingness to make the necessary effort to make the acquisition work effectively 
D)  Incompetence on the part of workers in the acquired firm 
E)  Difficulties in coordinating manufacturing activities

Question 7

Differentiate between 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 joint venture and acquisition as...

Question 8

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 9

An advantage of a joint venture is that it allows a company to quickly gain entry into a new industry where barriers are high.

Accepted Answer

A) True 
 B)False

Question 10

When McDonald's introduced the McCafe, it began offering a new product that was not available in traditional McDonald's stores. The introduction of the McCafe is an example of which of the following?

Accepted Answer

A)  Transferring competencies 
B)  Diversification 
C)  Commonality 
D)  Economies of scope 
E)  Bureaucratic costs

Question 11

Economies of scope can be defined as:

Accepted Answer

A)  competencies that result from the skills of a company's top managers that help every business unit within a company perform at a higher level than it could if it operated as a separate or independent company. 
B)  some kind of skill or competency that when shared by two or more business units allows them to operate more effectively and create more value for customers. 
C)  the process of taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry. 
D)  the process of taking a distinctive competency developed by a business unit in one industry and using it to create a new business unit in a different industry. 
E)  the synergies that arise when one or more of a diversified company's business units are able to lower costs or increase differentiation because they can more effectively pool, share, and utilize expensive resources or capabilities.

Question 12

If a company generates free cash flow, that money technically belongs to shareholders.

Accepted Answer