management 455 chapter 8
A. The first uses a business-level strategy, while the second uses a set of business strategies and a corporate strategy.
B. The first uses a business-level strategy, while the second uses a corporate-wide strategy.
C. The first uses an operating strategy, while the second uses a business-line strategy.
D. The first uses a functional strategy, while the second uses a business-line strategy.
E. The first uses a single-line strategy, while the second uses a multi-line strategy.
A. picking the new industries to enter and deciding on the means of entry.
B. initiating actions to boost the combined performance of the corporation’s collection of businesses.
C. pursuing opportunities to leverage cross-business value chain relationships and strategic fit into competitive advantage.
D. establishing investment priorities and steering corporate resources into the most attractive business units.
E. divesting well-performing businesses.
A. Picking new industries to enter and deciding on the means of entry
B. Choosing the appropriate value chain for each business the company has entered
C. Pursuing opportunities to leverage cross-business value chain relationships and strategic fit into competitive advantage
D. Establishing investment priorities and steering corporate resources into the most attractive business units
E. Initiating actions to boost the combined performance of the businesses the firm has entered
A. selecting the appropriate value chain operating practices to improve the financial outlook.
B. starting a business from the ground up.
C. acquiring a company already established in the target industry.
D. forming a joint venture or partnership with another company.
E. structuring a strategic alliance with another company to take advantage of the opportunity.
A. the transferring of valuable resources and capabilities from one business to another.
B. combining related value chain activities of different businesses to achieve lower costs.
C. forcing cultural independence, operating diversity, and sophisticated analytical responsibility on the businesses to ensure compatibility with the corporate overhead identity.
D. sharing the use of powerful and well-respected brand names across multiple businesses.
E. encouraging knowledge-sharing and collaborative activity among the businesses.
A. the pursuit of rapid growth strategies in its most promising businesses.
B. initiating profit improvement or turnaround strategies in weak-performing businesses with potential.
C. the divestiture of unattractive businesses.
D. the pursuit of debt reduction opportunities that can lower the debt/equity ratio while maintaining asset levels.
E. the divestiture of businesses that do not fit into the company’s longer term plans.
A. sticking closely with the existing business lineup and pursuing available opportunities.
B. broadening the scope of diversification by entering additional industries.
C. divesting some businesses and retrenching to a narrower collection of businesses.
D. restructuring the entire company by adding and removing businesses to improve overall performance.
E. refocusing the existing businesses on new substitute product-line opportunities outside the existing industry framework.
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.
A. the attractiveness test, the profitability test, and the shareholder value test.
B. the strategic fit test, the competitive advantage test, and the return-on-investment test.
C. the resource fit test, the profitability test, and the shareholder value test.
D. the attractiveness test, the cost-of-entry test, and the better-off test.
E. the shareholder value test, the cost-of-entry test, and the profitability test.
A. the profit test, the competitive strength test, the industry attractiveness test, and the capital gains test.
B. the better-off test, the competitive advantage test, the profit expectations test, and the shareholder value test.
C. the barrier-to-entry test, the competitive advantage test, the growth test, and the stock price effect test.
D. the strategic fit test, the industry attractiveness test, the growth test, the dividend effect test, and the capital gains test.
E. the attractiveness test, the cost-of-entry test, and the better-off test.
A. make the company better off because it will produce a greater number of core competencies.
B. make the company better off by improving its balance sheet strength and credit rating.
C. make the company better off by spreading shareholder risks across a greater number of businesses and industries.
D. produce a synergistic outcome such that the company’s different businesses perform better together than apart and the whole ends up being greater than the sum of the parts.
E. help each business earn exactly what they were earning before coming under the same corporate umbrella.
A. outsourcing most of the value chain activities that have to be performed in the target business/industry.
B. acquiring a company already operating in the target industry, creating a new business from scratch, or forming a joint venture with one or more companies to enter the target industry.
C. integrating forward or backward into the target industry.
D. shifting from a strategic group comprised mostly of single-business companies to a strategic group comprised of diversified companies.
E. employing an offensive strategy with new product innovation as its centerpiece.
A. is an effective way to hurdle entry barriers, is usually quicker than trying to launch a brand-new startup operation, and allows the acquirer to move directly to the task of building a strong position in the target industry.
B. is less expensive than launching a new startup operation, thus passing the cost-of-entry test.
C. offers a challenging opportunity to train new resources and revive a sagging business even if does not offer great prospects for growth, profitability, or return on investment.
D. is more likely to result in passing the shareholder value test, the profitability test, and the better-off test.
E. offers the prospect of gaining an immediate competitive advantage in the new industry and thus helps ensure that the diversification move will pass the competitive advantage test for building shareholder value.
A. the fair market value of similar companies in the same geographic locale.
B. the preacquisition market value of the target company.
C. the comparable value of similar companies within the same market.
D. the amount paid as a down payment to be held in escrow until closing.
E. the difference between the amount that was offered and the amount that is escrowed.
A. Corporate venturing
B. Value chain integration
C. Resource capability process
D. Diversification activity capabilities
E. Business launch
A. When internal entry is cheaper than entry via acquisition
B. When a company possesses the skills and resources to overcome entry barriers and there is ample time to launch the business and compete effectively
C. When adding new production capacity will not adversely impact the supply demand balance in the industry by creating oversupply conditions
D. When the industry is growing rapidly and the target industry is comprised of several relatively large and well-established firms
E. When incumbent firms are likely to be slow or ineffective in combating a new entrant’s efforts to crack the market
A. building brand awareness.
B. avoiding the costs of doing due diligence.
C. achieving scale economies.
D. establishing supplier relationships.
E. acquiring technical know-how.
A. the costs of searching for an attractive target.
B. the costs of evaluating its worth.
C. bargaining costs.
D. the costs of completing the transaction.
E. the premium cost.
A. their value chains exhibit competitively valuable cross-business commonalities.
B. the products of the different businesses are bought by many of the same types of buyers.
C. the products of the different businesses are sold in the same types of retail stores.
D. the businesses have several key suppliers in common.
E. the production methods they employ both entail economies of scale.
A. sell products from the different businesses to much the same types of buyers and retail outlets.
B. have dissimilar value chains and resource requirements with no competitively important cross-business commonalities at the value chain level.
C. perform better than just the sum of the individual businesses.
D. will always have several key suppliers in common.
E. employ production methods that create economies of scale.
A. with strategic fit with respect to key value chain activities and competitive assets.
B. that are highly independent, proficient, and efficient operating firms.
C. with strategic fit across separate value chain activities that drive each business.
D. that can also include unrelated businesses with dissimilar resource requirements.
E. that have dissimilar value chain activities with no cross-business commonalities.
A. It can offer opportunities for transferring expertise, technology, and other capabilities from one business to another.
B. It can offer opportunities for reducing costs on advertising by leveraging use of a competitively powerful brand name.
C. It is particularly well-suited for the use of first-mover strategies and capturing valuable financial fits.
D. It may present opportunities for cross-business collaboration to create valuable new competencies and capabilities.
E. It can facilitate sharing of other resources (besides brands) that support corresponding value chain activities across businesses.
A. to prevent the transfer of expertise or technology or capabilities from one business to another.
B. to independently preserve common brand names from cross-business usage.
C. to increase costs by combining the performance of the related value chain activities of different businesses.
D. for cross-business collaboration to build valuable new resource strengths and competitive capabilities.
E. to maintain business value chain activities separate and apart from one business to another to protect company independence.
A. diversify into new industries that present opportunities to transfer specialized expertise, technological know-how, or other valuable resources and capabilities from one business’s value chain to another’s.
B. diversify into foreign markets where the firm has unrelated businesses.
C. acquire rival firms that have broader product lines so as to give the company access to a wider range of buyer groups.
D. acquire companies in forward distribution channels (wholesalers and/or retailers).
E. expand into foreign markets where the firm currently does no business.
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
A. the potential for skills transfer in procuring materials.
B. the sharing of resources and capabilities in logistics.
C. the benefits of added collaboration with common supply chain partners.
D. the added leverage gained with shippers when securing volume discounts on incoming parts and components.
E. the increased allocation and allotment of support activities and specialized resources and capabilities.
A. The ability to continue using existing processes
B. Cost savings in research and development areas
C. Shorter times in getting new products to market
D. Increased sales in both the parent company and the diversified businesses
E. A greater number of innovative products or processes
A. Scale refers to the magnitude or size of the operation, while scope refers to the reach of defined savings within the value chain.
B. Scale refers to the extent of change, while scope refers to the possibilities of change.
C. Scale is about dimensions, while scope is about the capacity available for production capabilities.
D. Scale refers to cost savings that accrue directly from larger-sized operations, while scope stems directly from strategic fit along the value chains of related businesses.
E. Scale and scope mean the same thing and the only difference is the extent of cost savings accrued from unrelated businesses in each.
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.
A. The ability to broaden the company’s product line
B. The opportunity to convert cross-business strategic fit into competitive advantage over business rivals whose operations don’t offer comparable strategic fit benefits
C. The potential for improving the stability of the company’s financial performance
D. The ability to serve a broader spectrum of buyer needs
E. The added capability it provides in overcoming the barriers to entering foreign markets
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.
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.
A. combining related value-chain activities of different businesses into a single operation.
B. performing all of the value chain activities of related sister businesses at the same location.
C. extending the firm’s scope of operations over a wider geographic area.
D. expanding the size of a company’s manufacturing plants.
E. having more value chain activities performed in-house rather than outsourcing them.
A. offers ways for a firm to realize 1 + 1 = 3 benefits because the value chains of the different businesses present competitively valuable cross-business relationships.
B. is less capital intensive and usually more profitable than unrelated diversification.
C. involves diversifying into industries having the same kinds of key success factors.
D. is less risky than either vertical integration or unrelated diversification due to lower capital requirements.
E. passes the industry attractiveness test and thus offers the best route to 2 + 2 = 4 benefits.
A. the least risky way to diversify is to seek out businesses that are leaders in their respective industry.
B. the best companies to acquire are those that offer the greatest economies of scope rather than the greatest economies of scale.
C. the best way to build shareholder value is to acquire businesses with strong cross-business financial fit.
D. any company that can be acquired on good financial terms and that has satisfactory growth and earnings potential represents a good acquisition and a good business opportunity.
E. the task of building shareholder value is better served by seeking to stabilize earnings across the entire business cycle than by seeking to capture cross-business strategic fits.
A. can achieve at least existing profit margins into the near future.
B. has the opportunity to generate positive buzz in the industry, even if it may not be able to contribute to the parent firm’s bottom line
C. can pass the industry attractiveness test and the cost-of-entry test, and if it has good prospects for profit growth.
D. can pass at least the industry attractiveness test if not the cost of entry test.
E. can add economic value for managers.
A. the role that a diversified corporation plays in nurturing its component businesses through the provision of top management expertise, disciplined control, financial resources, and capabilities.
B. the help subsidiaries receive in performing better when they utilize astute high-level guidance from corporate executives.
C. the corporation’s ability to provide generalized support resources so as to create value by lowering companywide overhead costs by eliminating duplication of efforts.
D. efforts to capitalize on the umbrella brands and enhance value proposition across businesses.
E. efforts to judiciously segregate funds for each business in such a way that keeps the money safe and discourages shifting funds across business units.
A. is a generalized resource that can be leveraged in unrelated diversification.
B. is a brand name that can steer a narrow assortment of business types.
C. represents a public disclosure spotlighting the corporate image.
D. represents an overall corporate marker covering its overriding image of sustainability and responsibility.
E. is a specialized resource designed to influence profit growth.
A. is more able than other companies to boost the combined performance of its individual businesses through its high-level guidance, general oversight, and other corporate-level contributions.
B. is more able than other companies to create positive collaboration within its portfolio for different specialty groups and geographic locations.
C. results in supporting short-term economic shareholder value.
D. manages a set of fundamentally similar business operations inside fundamentally similar industries and environments.
E. avoids acquiring undervalued companies and thus reduces risks.
A. struggling companies with good turnaround potential, undervalued companies that can be acquired at a bargain price, and companies that have bright growth prospects but are short on investment capital.
B. companies offering the biggest potential to reduce labor costs.
C. cash cow businesses with excellent financial fit.
D. companies that are market leaders in their respective industries.
E. companies that employ the same basic type of competitive strategy as the parent corporation’s existing businesses.
A. the difficulties of passing the cost-of-entry test and the ease with which top managers can make the mistake of diversifying into businesses where competition is too intense.
B. the difficulties of capturing financial fit and having insufficient financial resources to spread business risk across many different lines of business.
C. the demanding managerial requirements and the limited competitive advantage potential due to lack of cross-business strategic fit benefits.
D. ending up with too many cash hog businesses and too much diversity among the competitive strategies of the businesses it has diversified into.
E. the difficulties of achieving economies of scope and conflicts/incompatibility among the competitive strategies of the company’s different businesses.
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. leverage the cross-business strategic fit advantage effectively
A. underemphasizing the importance of resource fit and the strong likelihood of diversifying into businesses that top management does not know all that much about.
B. insufficient cash flows to finance so many different lines of business and a lack of uniformity among the strategies of the businesses it has diversified into.
C. volatile sales and profits and making the mistake of diversifying into too many cash cow businesses.
D. the difficulties of competently managing many different businesses and being without the added source of competitive advantage that cross-business strategic fit provides.
E. over-investing in the achievement of economies of scope and the difficulties of achieving a good mix of cash cow and cash hog businesses.
A. 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 reduced unemployment risk
E. To restructure an underperforming business
A. A broadly diversified enterprise
B. A narrowly diversified enterprise
C. A multi-business enterprise
D. A high compensation/low risk enterprise
E. A dominant business enterprise
A. those companies with a mix of valuable competitive assets, covering the spectrum from generalized to specialized resources and capabilities.
B. those large multibusiness firms, sometimes called conglomerates, because they have a unique capability designed to stabilize earnings.
C. companies with a portfolio of product choices for buyer-related behavior.
D. corporate managers who take on risks without performing due diligence.
E. corporate managers who want to play the corporate parent role without fiduciary responsibility.
A. Assessing the competitive strength of each business the company has diversified into
B. Determining which business units are cash cows and which ones are cash hogs, and then evaluating how soon the company’s cash hogs can be transformed into cash cows
C. Evaluating the strategic fits and resource fits among the various sister businesses
D. Assessing the attractiveness of the industries the company has diversified into, both individually and as a group
E. Ranking the performance prospects of the businesses from best to worst and deciding what priority to give each of the company’s business units in allocating resources
A. market size and projected growth rate.
B. emerging opportunities and threats, and the intensity of competition.
C. resource requirements and the presence of cross-industry strategic fits.
D. seasonal and cyclical factors, industry profitability, and whether an industry has significant social, political, regulatory, and environmental problems.
E. the utility of the products for consumers from all age-groups.
A. Market size and projected growth rate, industry profitability, and the intensity of competition
B. Industry uncertainty and business risk
C. The frequency with which strategic alliances and collaborative partnerships are used in each industry, and the extent to which firms in the industry utilize outsourcing
D. Resource requirements, and whether an industry has significant social, political, regulatory, and environmental problems
E. The presence of cross-industry strategic fits and matching resource requirements to the parent company
A. determining each industry’s key success factors, calculating the ability of the company to be successful on each industry KSF, and obtaining overall measures of the firm’s ability to compete successfully in each of its industries based on the combined KSF ratings.
B. determining each industry’s competitive advantage factors, calculating the ability of the company to be successful on each competitive advantage factor, and obtaining overall measures of the firm’s ability to achieve sustainable competitive advantage in each of its industries based on the combined competitive advantage factor ratings.
C. selecting a set of industry attractiveness measures, weighting the importance of each measure, rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to interpret the attractiveness of all the industries, both individually and as a group.
D. rating the attractiveness of each industry’s strategic and resource fits, summing the attractiveness scores, and determining whether the overall scores for the industries as a group are appealing or not.
E. identifying each industry’s average profitability, rating the difficulty of achieving average profitability in each industry, and deciding whether the company’s prospects for above-average profitability are attractive or unattractive, industry by industry.
A. determine which industry is the biggest and fastest growing.
B. get in position to rank the industries from most competitive to least competitive.
C. provide a basis for drawing analysis-based conclusions about the attractiveness of the industries a company has diversified into, both individually and as a group, and further to provide an indication of which industries offer the best and worst long-term prospects.
D. ascertain which industries have the easiest-to-achieve key success factors.
E. rank the attractiveness of the various industry value chains from best to worst.
A. a weighted ranking identifies which industries offer the best/worst long-term profit prospects.
B. an unweighted ranking doesn’t discriminate between strong and weak industry driving forces and industry competitive forces.
C. it does a more accurate job of singling out which industry key success factors are the most important.
D. an unweighted ranking doesn’t help identify which industries have the easiest and hardest value chains to execute.
E. the various measures of attractiveness are not likely to be equally important in determining overall attractiveness.
A. the lower the attractiveness weighting for that industry.
B. the higher the attractiveness weighting for that industry.
C. suggests the resources are beyond the parent company’s reach.
D. suggests the industry attractiveness measures have been incorrectly weighted.
E. the more likely the company’s profit and revenues will be intensive.
A. Deciding on the appropriate weights for the attractiveness measures
B. Different analysts use different weights for the different attractiveness measures
C. Gaining sufficient command of the industry to assign more accurate and objective ratings
D. Deciding the impact of strategic fits to unrelated and related diversification
E. Deciding whether a business is related or unrelated
A. a substantial portion of its revenues and expenses must come from business units with relatively low attractiveness scores.
B. its principal business must be in industries with a good outlook for growth and above-average profitability.
C. its business units in high attractiveness score industries should be candidates for divesture.
D. its business units must operate within the favorable aspects of their industry environment.
E. its business units must have a popular image, even if the performance of their products does not greatly satisfy buyer expectations.
A. vulnerability to seasonal and cyclical downturns, vulnerability to driving forces, and vulnerability to fluctuating interest rates and exchange rates.
B. relative market share, the ability to match or beat rivals on key product attributes, brand image and reputation, costs relative to competitors, and the ability to benefit from strategic fits with sister businesses.
C. the appeal of its strategy, the relative number of competitive capabilities, the number of products in each business’s product line, which businesses have the highest/lowest market shares, and which businesses earn the highest/lowest profits before taxes.
D. the ability to hurdle barriers to entry, value chain attractiveness, and business risk.
E. cost reduction potential, customer satisfaction potential, and comparisons of annual cash flows from operations.
A. calculated by dividing a company’s percentage share of total industry sales volume by the percentage share held by its largest rival.
B. calculated by adjusting a company’s revenue share up or down by a factor proportional to whether their quality/customer service factors are above/below industry averages.
C. calculated by dividing a company’s market share (based on dollar volume) by the industry-average market share.
D. particularly useful in identifying cash cows, which have big relative market shares (above 1.0), and cash hogs, which have low relative market shares (below 0.5).
E. calculated by subtracting the industry-average market share (based on revenue) from the company’s market share to highlight relative share above/below the industry average. This amount is a better indicator of a business’s competitive strength than is just looking at the firm’s market share percentage.
A. determining each industry’s key success factors, rating the ability of each business to be successful on each industry KSF, and adding the individual ratings to obtain overall measures of each business’s ability to compete successfully.
B. identifying the competitive forces facing each business, rating the strength of these competitive forces industry by industry, and then ranking each business’s ability to be profitable, given the strength of the competition it faces.
C. selecting a set of competitive strength measures, weighting the importance of each measure, rating each business on each strength measure, multiplying the strength ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each business unit to obtain an overall competitive strength score, and using the overall competitive strength scores to evaluate the competitive strength of all the businesses, both individually and as a group.
D. determining which businesses possess good strategic fit with other businesses, identifying the portion of the value chain where this fit occurs, and evaluating the strength of the competitive advantage attached to each of the strategic fits to get an overall measure of competitive advantage potential. Businesses with the highest/lowest competitive advantage potential have the most/least competitive strength.
E. rating the caliber of each businesses strategic and resource fit, weighting the importance of each type of strategic/resource fit, calculating weighted strategic/resource fit scores, and adding the weighted ratings for each business to obtain an overall strength score for each business unit that indicates whether the company has adequate strategic/resource fits to be a strong market contender in each of the industries where it competes.
A. identifying which businesses have large/small competitive advantages or competitive disadvantages vis-à-vis the rivals in their respective industries.
B. rating them from strongest to weakest in terms of contributing to the corporate parent’s revenue growth.
C. comparing resource strengths and weaknesses, business by business.
D. rating them from strongest to weakest in contending for market leadership in their respective industries.
E. rating them from strongest to weakest in terms of contributing to the corporate parent’s profitability.
A. That its business units are all fairly strong market contenders in their respective industries
B. That its business units are all fairly weak market contenders in their respective industries
C. That the company will not likely perform well
D. That a company’s competitive strength score does not relate to the market position of that business
E. That the company will likely fail
A. is useful for helping decide which businesses should have high, average, and low priorities in deploying corporate resources.
B. indicates which businesses are cash hogs and which are cash cows.
C. pinpoints what strategies are most appropriate for businesses positioned in the three top cells of the matrix, but is less clear about the best strategies for businesses positioned in the bottom six cells.
D. identifies which sister businesses have the greatest strategic fit.
E. identifies which sister businesses have the highest level of resource fit.
A. identifying which businesses have strategies that should be continued, which businesses have strategies that need fine-tuning, and which businesses have strategies that need a major overhaul.
B. that businesses having the greatest competitive strength and that are positioned in the most attractive industries should have the highest priority for corporate resource allocation and that competitively weak businesses in relatively unattractive industries should have the lowest priority and perhaps even be considered for divestiture.
C. pinpointing which strategies are most appropriate for businesses positioned in the four corners of the matrix (although the matrix reveals little about the best strategies for businesses positioned in the remainder of the matrix).
D. its ability to pinpoint what kind of competitive advantage or disadvantage each business has.
E. pinpointing which businesses to keep and which ones to divest.
A. only industry attractiveness in allocating resources and investment capital to its different businesses.
B. only business strength in allocating resources and investment capital to the different businesses.
C. both industry attractiveness and business strength in allocating resources and investment capital to its different businesses.
D. both industry attractiveness and product strength in allocating resources and investment capital to its different businesses.
E. both resource fit and product strength in allocating resources and investment capital to its different businesses.
A. to combine the performance of certain cross-business activities and thereby reduce costs.
B. to transfer skills, technology, or intellectual capital from one business to another.
C. for the company’s different businesses to share use of a well-respected brand name.
D. for sister businesses to collaborate in creating valuable new competitive capabilities.
E. to create a positive image in the industry irrespective of the financial performance of its businesses.
A. have value chain match-ups that offer opportunities to combine the performance of related value chain activities and reduce costs.
B. have value chain match-ups that offer opportunities to transfer skills or technology or intellectual capital from one business to another.
C. have opportunities to share use of a well-respected brand name.
D. have value chain match-ups that offer opportunities to create new competitive capabilities or to leverage existing resources.
E. are cash cows and which ones are cash hogs.
A. Ascertaining the extent to which business units have value chain match-ups that offer opportunities to combine the performance of related value chain activities and reduce costs
B. Ascertaining the extent to which business units have value chain match-ups that offer opportunities to transfer skills or technology or intellectual capital from one business to another
C. Ascertaining the extent to which business units are making maximum use of the parent company’s competitive advantages
D. Ascertaining the extent to which business units have value chain match-ups that offer opportunities to create new competitive capabilities or to leverage existing resources
E. Ascertaining the extent to which business units present opportunities to share use of a well-respected brand name
A. each business is a cash cow.
B. its businesses add to a company’s overall resource strengths and have matching resource requirements and/or when the parent has adequate corporate resources to support its business needs and add value.
C. each business is sufficiently profitable to generate an attractive return on invested capital.
D. each business unit produces large internal cash flows over and above what is needed to build and maintain the business.
E. the resource requirements of each business exactly match the company’s available resources.
A. the resource requirements of each business exactly match the resources the company has available.
B. individual businesses have matching resource requirements at points along their value chain and add to a company’s overall resource strengths and when solid parenting capabilities exist without spreading itself too thin.
C. each business generates just enough cash flow annually to fund its own capital requirements and thus does not require cash infusions from the corporate parent.
D. each business unit produces sufficient cash flows over and above what is needed to build and maintain the business, thereby providing the parent company with enough cash to pay shareholders a generous and steadily increasing dividend.
E. there are enough cash cow businesses to support the capital requirements of the cash hog businesses.
A. Internal capital market
B. Cash cow benefits
C. Economic value added
D. Shareholder value added
E. Derived valuation
A. diversifying risk across a broad spectrum of businesses.
B. the risk/reward concept of financial analysis.
C. the fact that different businesses have different cash flow and investment characteristics.
D. acknowledging that each business unit has varying degrees of opportunity.
E. acknowledging that each business is financially strong.
A. Cash hog
B. Cash cow
C. Cash chest
D. Free cash flow
E. Cash generator
A. whether the excess cash flows generated by cash cow businesses are sufficient to cover the negative cash flows of its cash hog businesses.
B. whether a business adequately contributes to achieving the corporate parent’s performance targets.
C. whether the company has adequate financial strength to fund its different businesses and maintain a healthy credit rating.
D. whether the corporate parent has sufficient cash to fund the needs of its individual businesses and pay dividends to shareholders without having to borrow money.
E. whether the corporate parent has or can develop sufficient resource strengths and competitive capabilities to be successful in each of the businesses it has diversified into.
A. Determining whether the excess cash flows generated by cash cow businesses are sufficient to cover the negative cash flows of its cash hog businesses
B. Determining whether recently acquired businesses are acting to strengthen a company’s resource base and competitive capabilities or whether they are causing its competitive and managerial resources to be stretched too thinly across its businesses
C. Determining whether opportunity exists for achieving 1 + 1 = 2 outcomes
D. Determining whether the company has adequate financial strength to fund its different businesses and maintain a healthy credit rating
E. Determining whether the corporate parent has or can develop sufficient resource strengths and competitive capabilities to be successful in each of the businesses it has diversified into
A. Businesses with high industry attractiveness ratings should be given top priority and those with low industry attractiveness ratings should be given low priority.
B. Business subsidiaries with the brightest profit and growth prospects, attractive positions on the nine-cell matrix, and solid strategic and resource fits generally should head the list for corporate resource support.
C. The positions of each business in the nine-cell attractiveness-strength matrix should govern resource allocation.
D. Businesses with the most strategic and resource fits should be given top priority and those with the fewest strategic and resource fits should be given low priority.
E. Businesses with high competitive strength ratings should be given top priority and those with low competitive strength ratings should be given low priority.
A. making acquisitions to establish positions in new businesses or to complement existing businesses.
B. investing in ways to strengthen or grow existing businesses.
C. funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses.
D. paying off existing debt and building cash reserves,.
E. .decreasing dividend payments and/or selling shares of stock.
A. Making acquisitions to establish positions in new businesses or to complement existing businesses
B. Investing financial resources in cash cow businesses until they show enough strength to generate positive cash flows
C. Funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses
D. Paying down existing debt, increasing dividends, or repurchasing shares of the company’s stock
E. Investing in ways to strengthen or grow existing businesses
A. broadening the company’s business scope by making new acquisitions in new industries.
B. divesting weak-performing businesses and retrenching to a narrower base of business operations.
C. restructuring the company’s business lineup with a combination of divestitures and new acquisitions to put a whole new face on the company’s business makeup.
D. pursuing growth opportunities within the existing business lineup.
E. pursuing certain acquisitions even if they have done badly or haven’t quite lived up to expectations.
A. Broadening the company’s business scope by making new acquisitions in new industries
B. Increasing dividend payments to shareholders and/or repurchasing shares of the company’s stock
C. Restructuring the company’s business lineup with a combination of divestitures and acquisitions to put a whole new face on the company’s business makeup
D. Pursuing multinational diversification and striving to globalize the operations of several of the company’s business units
E. Divesting weak-performing businesses and retrenching to a narrower base of business operations
A. Multinational diversification
B. Restructure the company’s business lineup with a combination of divestitures and new acquisitions
C. Craft new initiatives designed to build/enhance the reputation and image of the company
D. Divest some businesses and retrench to a narrower diversification base
E. Broaden the diversification base
A. it has resources or capabilities that are eminently transferable to other related or complementary businesses.
B. the company’s growth is sluggish and it wants the sales and profit boost that a new business can provide.
C. management wants to lessen the company’s vulnerability to seasonal or recessionary influences or to threats from emerging new technologies, legislative regulations, and new product innovations that alter buyer preferences and resource requirements.
D. it wants to make new acquisitions to strengthen or complement some of its present businesses, market positioning, and competitive capabilities.
E. its top management wants to increase its compensation.
A. 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. 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. an attractive strategy option for revamping a diverse business lineup that lacks strong cross-business financial fit.
D. sometimes an attractive option for deepening a diversified company’s technological expertise and supporting a faster rate of product innovation.
E. a strategy best reserved for companies in poor financial shape.
A. a spinoff.
B. a wholly-owned subsidiary.
C. a functional divesture.
D. fully-diluted stock.
E. a restructure.
A. certain businesses have questionable long-term potential.
B. a diversified company has businesses that have little or no strategic or resource fits with the “core” businesses that management wishes to concentrate on.
C. certain business units are weakly positioned and show poor prospects for providing a good return on investment.
D. market conditions in a once-attractive business have badly deteriorated.
E. business units are cash cows with promising futures.
A. When a diversified company has struggled to make certain businesses attractively profitable
B. When a diversified company has too many cash cows
C. When one or more businesses are cash hogs with questionable long-term potential
D. When businesses in once-attractive industries have badly deteriorated
E. When a diversified company has businesses that have little or no strategic or resource fits with the “core” businesses that management wishes to concentrate on
A. When the business is worth more to another company than to the parent company
B. When the business is a cash cow
C. When the business provides valuable strategic or resource fits for another company
D. When shareholders would be better served if the company sells the business for a generous premium
E. When the business lacks the cross-boundary presence of shared values and cultural compatibility
A. revamping the value chains of each of a diversified company’s businesses.
B. focusing on restoring the profitability of its money-losing businesses and thereby improving the company’s overall profitability.
C. revamping the strategies of its different businesses, especially those that are performing poorly.
D. divesting low-performing businesses that do not fit and acquiring new ones where opportunities are more promising to put a new face on the company’s business makeup.
E. broadening the scope of diversification to include a larger number of smaller and more diverse businesses.
A. involve making major changes in a diversified company’s business lineup, divesting some businesses and/or acquiring others, so as to put a whole new face on the company’s business lineup.
B. entail reducing the scope of diversification to a smaller number of businesses.
C. entail selling off marginal businesses to free up resources for redeployment to the remaining businesses.
D. focus on crafting initiatives to restore a diversified company’s money-losing businesses to profitability.
E. focus on broadening the scope of diversification to include a larger number of businesses and boosting the company’s growth and profitability.
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. a business lineup that consists of too many cash cow businesses.
A. Business units that lack strategic fit with the businesses to be retained
B. Weak performers
C. Businesses in unattractive industries
D. Businesses that are cash hogs or that lack other types of resource fit
E. Businesses compatible with the company’s revised diversification strategy
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