Question Details

Multiple Choice Questions
1. Corporate-level strategy addresses two related issues: ?????????
a. How to compete in a given business; the application of technology
b. What businesses to compete in; how these businesses can achieve synergy
c. How to integrate primary activities; increase shareholder wealth
d. How to improve a firm's infrastructure; how to maintain ethical behavior
2. Individual investors are dependent upon the corporation's managers to
a. Diversify the stockholder's investments in order to reduce risk
b. Add value to their investments in a way that the stockholders could not accomplish
on their own
c. Achieve risk reduction at a lower cost than stockholders could obtain on their own
d. Maximize short-term returns in the form of dividends
3. McKesson, a large distribution company, sells many product lines such as
pharmaceuticals and liquor through its super warehouses. This is an example of
a. Achieving economies of scope through related diversification
b. Achieving market power through related diversification
c. Attaining the benefits of restructuring through unrelated diversification
d. Attaining the benefits of parenting through unrelated diversification
4. Philip Morris bought Miller Brewing and used its marketing expertise to improve
Miller's market share. This justification for diversification is best described as
a. Utilizing common infrastructures
b. Capitalizing on core competencies
c. Reducing corporate risk
d. Using portfolio analysis
5. The corporate office of Cooper Industries adds value to its acquired businesses by
performing such activities as auditing their manufacturing operations, improving their
accounting activities, and centralizing union negotiations. This is an example of
a. Achieving economies of scope through related diversification
b. Achieving market power through related diversification
c. Attaining the benefits of restructuring through unrelated diversification
D. Attaining the benefits of parenting through unrelated diversification
6. _________ reflect(s) the collective learning in organizations such as how to coordinate
production skills, integrate multiple streams of technologies, and market and
merchandise diverse products and services.
a. Primary value chain activities
b. Culture
c. Core competencies
d. Horizontal integration

7. For a core competence to be a viable basis for the corporation strengthening a new
business unit, there are three requirements. Which one of the following is not one of
these requirements?
a. The competence must help the business gain strength relative to its competition
b. The new business must be similar to existing businesses to benefit from a core
competence
c. The collection of competencies should be unique, so that they cannot be easily
imitated
d. The new business must have an established large market share
8. Sharing core competencies is one of the primary potential advantages of
diversification. In order for diversification to be most successful, it is important that
a. The similarity required for sharing core competencies must be in the value chain,
not in the product
b. The products use similar distribution channels
c. The target market is the same, even if the products are very different
d. The methods of production are the same
9. When management uses common production facilities or purchasing procedures to
distribute different but related products, they are
a. Building on core competencies
b. Sharing activities
c. Achieving process gains
d. Using portfolio analysis
10. Shaw Industries, a giant carpet manufacturer, increases its control over raw materials
by producing much of its own polypropylene fiber, a key input into its manufacturing
process. This is an example of
a. Leveraging core competencies
b. Sharing activities
C. Vertical integration
d. Pooled negotiating power
11. The risks of vertical integration include all of the following except
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

12. Unbalanced capacities that limit cost savings, difficulties in combining specializations,
and reduced flexibility are disadvantages associated with
a. Strategic alliances
b. Divestment
c. Vertical integration
d. Horizontal integration
13. A firm should consider vertical integration when
a. The competitive situation is highly volatile
b. Customer needs are evolving
c. The firm's suppliers willingly cooperate with the firm
d. The firm's suppliers of raw materials are often unable to maintain quality standards
14. It may be advantageous to vertically integrate when
a. Lower transaction costs and improved coordination are vital and achievable through
vertical integration
b. The minimum efficient scales of two corporations are different
c. Flexibility is reduced, providing a more stationary position in the competitive
environment
d. Various segregated specializations will be combined
15. Transaction costs include all of the following costs except
a. Search costs
b. Negotiating costs
c. Monitoring costs
d. Agency costs
16. Vertical integration is attractive when
a. Transaction costs are higher than internal administrative costs
b. Internal administrative costs are higher than transaction costs
c. Transaction costs and internal administrative costs are equal
d. Search costs are higher than monitoring costs
17. __________ is when a firm's corporate office helps subsidiaries make wise choices in
their own acquisitions, divestures, and new ventures.
a. Parenting
b. Restructuring
c. Leveraging core competencies
d. Increasing market power

18. __________ is when a firm tries to find and acquire either poorly performing firms
with unrealized potential or firms in industries on the threshold of significant, positive
change.
a. Parenting
b. Restructuring
c. Leveraging core competencies
d. Sharing activities
19. According to the text, corporate restructuring includes
a. Capital restructuring, asset restructuring, and technology restructuring
b. Global diversification, capital restructuring, and asset restructuring
c. Management restructuring, financial restructuring, and procurement restructuring
d. Capital restructuring, asset restructuring, and management restructuring
20. Portfolio management matrices are applied to what level of strategy?
a. Departmental level
b. Business level
c. Corporate level
d. International level
21. When using a BCG matrix, a business that currently holds a large market share in a
rapidly growing market and that has minimal or negative cash flow would be known
as a
a. Cow
b. Dog
c. Problem child
d. Star
22. In the BCG (Boston Consulting Group) Matrix, a business that has a low market share
in an industry characterized by high market growth is termed a
a. Star
b. Question mark
c. Cash cow
d. Dog
23. Portfolio management frameworks (e.g., BCG matrix) share which of the following
characteristics?
a. Grid dimensions are based on external environments and internal
capabilities/market positions
b. Businesses are plotted on a 3-dimensional grid
c. Position in the matrix suggests a need for or ability to share, infrastructures or build
on core competences
d. They are most helpful in helping businesses develop types of competitive advantage

24. A "cash cow," referred to in the Boston Consulting Group Portfolio management
technique, refers to a business that has
a. Low market growth and relatively high market share
b. Relatively low market share and low market growth
c. Relatively low market share and high market growth
d. High market growth and relatively high market share
25. In managing a firm's portfolio, the BCG matrix would suggest that
a. "Dogs" should be invested in to increase market share and become cash cows
b. "Stars" are in low growth markets and can provide excess cash to fund other
opportunities
c. "Question marks" can represent future "stars" if their market share is increased
d. "Cash cows" require substantial cash outlays to maintain market share
26. In the Boston Consulting Group's (BCG) Growth Share Matrix, the suggested strategy
for "stars" is to
a. Milk them to finance other businesses
b. Invest large sums to gain a good market share
c. Not invest in them and to shift cash flow to other businesses
d. Maintain position and after the market growth slows use the business to provide
cash flow
27. All of the following are limitations (or downsides) of the BCG (Boston Consulting
Group) matrix except
a. Every business cannot be accurately measured and compared on the two dimensions
b. It views each business as a stand-alone entity and ignores the potential for synergies
across businesses
c. It takes a dynamic view of competition which can lead to overly complex analyses
d. While easy to comprehend, the BCG matrix can lead to some troublesome and
overly simplistic prescriptions
28. The three primary means by which a firm can diversify are:
A. Mergers and acquisitions; joint ventures and strategic alliances; internal
development
b. Mergers and acquisitions; differentiation; overall cost leadership
c. Joint ventures and strategic alliances; integration of value chain activities; acquiring
human capital
d. Mergers and acquisitions; internal development; differentiation

29. The downsides or limitations of mergers and acquisitions include all of the following
except:
a. Expensive premiums that are frequently paid to acquire a business
b. Difficulties in integrating the activities and resources of the acquired firm into a
corporation's on-going operations
c. It is a slow means to enter new markets and acquire skills and competences
d. There can be many cultural issues that can doom an otherwise promising acquisition
30. Divesting businesses can accomplish many different objectives. These include
a. Enabling managers to focus their efforts more directly on the firm's core businesses
b. Providing the firm with more resources to spend on more attractive alternatives
c. Raising cash to help fund existing businesses
d. All of the above
31. A company offering local telecommunications service combines resources with an
international company that manufactures digital switching equipment to research a
new type of telecommunications technology. This is an example of
a. Joint diversification
b. Strategic alliance
c. Divestment
d. Global integration
32. Cooperative relationships such as __________ have the potential advantages such as
entering new markets, reducing manufacturing (or other) costs in the value chain, and
developing and diffusing new technologies.
a. Joint ventures
b. Mergers and acquisitions
c. Strategic alliances 2 so Confusing! It says they are the same but they are different
d. A and C 1
33. All of the following are guidelines for managing strategic alliances except
a. Establishing a clear understanding between partners
b. Relying primarily on a contract to make the joint venture work DUMB Question!
c. Not shortchanging your partner
d. Working hard to ensure a collaborative relationship between partners

34. Which of the following statements regarding internal development as a means of
diversification is false?
a. Many companies use internal development to extend their product lines or add to
their service offerings
b. An advantage of internal development is that it is generally faster than other means
of diversification and firms can benefit from speed in developing new products and
services
c. The firm is able to capture the wealth created without having to "share the wealth"
with alliance partners
d. Firms can often develop products or services at a lower cost if they rely on their
own resources instead of external funding
35. __________ may be time consuming and, therefore, firms may forfeit the benefits of
speed that growth through __________ and __________ can provide.
a. Strategic alliances; joint ventures, internal development
b. Internal development; mergers; acquisitions
c. Strategic alliances; mergers; joint ventures
d. Mergers; internal development; strategic alliances
36. According to Michael Porter: "There's a tremendous allure to __________. It's the big
play, the dramatic gesture. With one stroke of the pen you can add billions to size, get
a front page story, and create excitement in markets."
a. Strategic alliances and joint ventures
b. Mergers and acquisitions
c. Internal development
d. Differentiation strategies
37. An antitakeover tactic called (a) __________ 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.
a. Golden parachute
b. Greenmail
c. Poison pill
d. Scorched earth
38. An antitakeover tactic in which existing shareholders have the option to buy additional
shares of stock at a discount to the current market price is called
a. Greenmail
b. A poison pill
c. A golden parachute
d. Scorched earth

39. The term "golden parachutes" refers to
a. A clause requiring that huge dividend payments be made upon takeover
b. Financial inducements offered by a threatened firm to stop a hostile suitor from
acquiring it
c. Managers of a firm involved in a hostile takeover approaching a third party about
making the acquisition
d. Pay given to executives fired because of a takeover
40. Antitakeover tactics include all of the following except
a. Greenmail
b. Golden parachutes
c. Golden handcuffs
d. Poison pills

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