Exam 8: Corporate Strategy: Diversification and the Multibusiness Company

A) stem from the cost-saving efficiencies of operating over a wider geographic area.
B) have to do with the cost-saving efficiencies of distributing a firm's product through many different distribution channels simultaneously.
C) stem from cost-saving strategic fits along the value chains of related businesses.
D) refer to the cost savings that flow from operating across all or most of an industry's value chain activities.
E) arise from the cost-saving efficiencies of having a wide product line and offering customers a big selection of models and styles to choose from.

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A) ongoing declines in the market shares of one or more major business units that are falling prey to more market-savvy competitors.
B) a business lineup that consists of too many slow-growth,declining,low-margin,or competitively weak businesses.
C) an excessive debt burden with interest costs that eat deeply into profitability.
D) ill-chosen acquisitions that haven't lived up to expectations.
E) All of these.

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A) spots opportunities to expand into industries whose technologies and products complement its present business.
B) leverages existing resources 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 of such businesses.
D) can open up new avenues for reducing costs by diversifying into closely related businesses.
E) expands into additional businesses that unlock possibilities for a comprehensive cost enhancement strategy.

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A) Resource activities fit.
B) Strategic fit.
C) Value proposition fit.
D) Cross-border simulation fit.
E) Transfer opportunity fit.

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A) all of the potential acquisition candidates are losing money.
B) it is impractical to outsource most of the value chain activities that have to be performed in the target business/industry.
C) there is ample time to launch the new business from the ground up and entry barriers can be hurdled at acceptable cost.
D) the company has built up a hoard of cash with which to finance a diversification effort.
E) none of the companies already in the industry are attractive strategic alliance partners.

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A) Transferring specialized expertise,technological know-how,or other valuable resources and capabilities from one business's value chain to another's.
B) Cost sharing between businesses by combining their related value chain activities into a single operation.
C) Overhauling and streamlining the operations of the business by refocusing value chain activities toward businesses that can provide a superior job of parenting.
D) Exploiting common use of a well-known brand name.
E) Sharing other resources (besides brands) that support corresponding value chain activities across businesses.

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A) Strategic fit between two businesses exists when the management know-how accumulated in one business is transferable to the other.
B) Strategic fit exists when two businesses present opportunities to economize on marketing,selling,and distribution costs.
C) Competitively valuable cross-business strategic fits are what enable related diversification to produce a synergistic performance outcome.
D) Strategic fit is primarily a by-product of unrelated diversification and exists when the value chain activities of unrelated businesses possess economies of scope and good financial fit.
E) Strategic fit exists when a company can transfer its brand-name reputation to the products of a newly acquired business and add to the competitive power of the new business.

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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.

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A) require successful integration of the culture,systems,and structure of the firm into the acquiring firm,which is a costly and time-consuming process.
B) require an in-depth understanding of the firm so as to develop potential strategic responses to the target market.
C) indicate that the premium paid for the company was far too high for what assets the acquiring firm purchased,and therefore failed the cost-of-entry test.
D) require managerial attention at the highest level and this cannot always be provided.
E) All of these.

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A) is usually the most attractive long-run strategy for a broadly diversified company confronted with recession,high interest rates,mounting competitive pressures in several of its businesses,and sluggish growth.
B) is a strategy that allows a diversified firm's energies to be concentrated on building strong positions in a smaller number of businesses rather the stretching its resources and managerial attention too thinly across many businesses.
C) is an attractive strategy option for revamping a diverse business lineup that lacks strong cross-business financial fit.
D) is sometimes an attractive option for deepening a diversified company's technological expertise and supporting a faster rate of product innovation.
E) is a strategy best reserved for companies in poor financial shape.

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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.

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A) The company goes on an acquisition spree whereby management is called on to assimilate and oversee many new businesses quickly.
B) The company exceeds sufficient resource depth to do a creditable job of transferring skills and competencies from one of its businesses to another.
C) The company declines to spread its competitive assets across many businesses.
D) The business diversification is limited to a narrow business lineup.
E) The business has a deep resource pool to create competitive advantage.

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A) diversify into businesses that can produce consistently good earnings and returns on investment and thereby satisfy the attractiveness test.
B) negotiate favorable acquisition prices (to satisfy the cost-of-entry test) .
C) do a superior job of corporate parenting via high-level managerial oversight and resource sharing,financial resource allocation and portfolio management,or restructuring underperforming businesses (to satisfy the better-off test) .
D) satisfy the attractiveness test,the cost-of-entry test,and the better-off test.
E) All of these.

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A) In order to reduce risk by way of spreading the company's investments over a set of truly diverse industries.
B) To enable a company to achieve rapid or continuous growth.
C) To chance that market downtrends in some of the company's businesses will be partially offset by cyclical upswings in its other businesses.
D) To provide benefits to managers such as high compensation and reduction in employment risk.
E) All of these.

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A) Operating costs.
B) Expense itemization.
C) Transaction costs.
D) Servicing costs.
E) Entry costs.

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A) in R&D and technology activities.
B) in supply chain activities.
C) in sales and marketing activities.
D) in production and distribution activities.
E) anywhere along the respective value chains of related businesses-no one place is best.

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A) it is a cash cow.
B) its competitive value is created from strategic fit opportunities,and is made possible by transferring,combining,and sharing resources and capabilities from one business to another to create new competitive capabilities.
C) it is the company's biggest profit producer or is capable of becoming the biggest.
D) it is in a fast-growing industry.
E) it operates in an industry where competition is less intense and driving forces are relatively weak.

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