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Mana 4322 (Chapter 6)

Corporate-level strategy addresses two related issues:
what businesses to compete in; how these businesses can achieve strategy
Individual investors are dependent upon the corporation’s managers to
add value to their investments in a way that the stockholders could not accomplish on their own
McKesson, a large distribution company, sells many product lines such as pharmaceuticals and liquor through its super warehouses. This is an example of
achieving economies of scope through related diversification
Philip Morris bought Miller Brewing and used its marketing expertise to improve Miller’s market share. This justification for diversification is best described as
capitalizing on core competencies
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
attaining the benefits of parenting through unrelated diversification
Core competencies
reflect the collective learning in organizations, how to coordinate diverse production skills, integrate multiple streams of technologies, and market diverse products and services
For competencies to be a viable basis for the corporation strengthening a new business unit, there are three requirements. Which of the following is not one of these requirements?
the new business must have an established large market share
Sharing core competencies is one of the primary potential advantages of diversification. In order for diversification to be most successful it is important that
the similarity required for sharing core competencies must be in the value chain not in the product
When management uses common production facilities or purchasing procedures to distribute different but related products, they are
sharing activities
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
vertical integration
The risks of vertical integration include all of the following EXCEPT
lack of control over valuable assets
Unbalanced capacities that limit cost savings, difficulties in combining specializations, and reduced flexibility are disadvantages associated with
vertical integration
A firm should consider vertical integration when
the firm’s suppliers of raw materials are often unable to maintain quality standards
It may advantageous to vertically integrate when
lower transaction costs and improved coordination are vital and achievable through vertical integration
Transaction costs include all of the following costs EXCEPT
agency costs
Vertical integration is attractive when
transaction costs are higher than internal administrative costs
Parenting
when a firm’s corporate office helps subsidiaries make wise choices in their own acquisitions, divestitures, and new ventures
Reconstructing
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
According to the text, corporate restructuring includes
capital restructuring, asset restructuring and management restructuring
Portfolio management matrices are applied to what level of strategy?
corporate level
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 know as a
star
In the BCG Matrix, a business that has a low market share in an industry characterized by high market growth is termed
question mark
Portfolio management frameworks (e.g., BCG matrix) share which of the following characteristics?
Grid dimensions are based on external environments and internal capabilities/market positions
A “cash cow” referred to in the Boston Consulting Group Portfolio management technique, refers to a business that has
low market growth and relatively high market share
In managing a firm’s portfolio, the BCG matrix would suggest that
“question marks” can represent future “stars” if their market share is increased
In the Boston Consulting Group’s (BCG) Growth Share Matrix, the suggested strategy for “stars” is to
maintain position and after the market growth slows use the business to provide cash flow
All of the following are limitations (or downsides) of the BCG (Boston Consulting Group) matrix EXCEPT
it takes dynamic view of competition which can lead to overly complex analyses
The three primary means by which a firm can diversify are:
mergers and acquisitions; joint ventures ans strategic alliances; internal development
The downside or limitations of mergers and acquisitions include all of the following EXCEPT:
it is slow means to enter new markets and acquire skills and competences
Divesting businesses can accomplish many different objectives, including
(all of these) enabling managers to focus their efforts more directly on the firm’s core business.

providing the firm with more resources to spend on more attractive alternatives.

raising cash to help fund existing businesses.

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
strategic alliance
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
both joint ventures and strategic alliances
All of the following are guidelines for managing strategic alliances EXCEPT
relying primarily on a contract to make the joint venture work
Which of the following statements regarding internal development as a means of diversification if FALSE?
an advantage on internal development is that it is generally faster than other means of diversification
_________________may be time consuming and, therefore, firms may forfeit the benefits of speed that growth through _________________ and __________________ can provide
Internal development; mergers; acquisitions
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 front page story, and create excitement in markets.
mergers and acquisitions
(anti-takeover tactic) greenmail
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
An anti-takeover 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 poison pill
golden parachutes
pay given to executives fired because of a takeover
anti-takeover tactics include all of the following EXCEPT
golden handcuffs

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