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Exam 6: Corporate Level Strategy

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Question 51

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Of the value-neutral incentives to diversify, all of the following are internal firm incentives EXCEPT

A) overall firm risk reduction.
B) uncertain future cash flows.
C) stricter interpretation of antitrust laws.
D) low performance.

E) A) and B)
F) A) and D)

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Question 52

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The drawbacks to transferring competencies by moving key people into new management positions include all EXCEPT

A) the people involved may not want to move.
B) managerial competencies are not easily transferable to different organizational cultures.
C) managers with these skills are expensive.
D) top-level managers may resist having these key people transferred.

E) A) and B)
F) A) and C)

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Question 53

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The purchasing of firms in the same industry is called:

In the Chapter 6 Strategic Focus, the Publicis Groupe has three major groups of businesses, each in a highly related but unique market area: advertising, media, and digital. This form of diversification strategy is known as related linked.

Which of the following reasons for diversification is most likely to increase the firm's value?

The basic types of operational economies through which firms seek value from economies of scope are

Walt Disney Company has successfully used related diversification to create value by ________________.

The _________________diversification strategy creates value in two ways. First, since the core competence has already been developed in one business, the firm does not have to allocate resources to develop it. Second, since the resource is intangible, competitors cannot easily imitate it.

The downside of synergy in a diversified firm is

Case Scenario 2: Jewell Company. Jewell Company (JC) is a $2 billion diversified manufacturer and marketer of simple household items, cookware, and hardware. In the early 1950s, JC's business consisted solely of manufactured curtain rods that were sold through hardware stores and retailers like Sears. Since the 1960s however, the company has diversified extensively through acquisition into such businesses as paintbrushes, writing pens, pots and pans, and hairbrushes. Over 90 percent of its growth can be attributed to these many small acquisitions, whose performance it improved tremendously through aggressive restructuring and its corporate emphasis on cost-cutting and cost controls. While JC's sixteen different lines of business may appear quite different, they all share the common characteristics of being staple manufactured items and sold primarily through volume retail channels like Wal-Mart, Target, and Kmart. Because JC operates each line of business autonomously (separate manufacturing, R&D, and selling responsibilities for each line), it is perhaps best described as pursuing a related linked diversification strategy. The common linkages are both internal (accounting systems, product merchandising skills, and acquisition competency) and external (distribution channel of volume retailers). JC is presently contemplating the acquisition of Plastico, a $3 billion U.S.-based manufacturer of flexible plastic products like trash cans, reheatable and freezable food containers, and a broad range of other plastic storage containers designed for home and office use. While Plastico has been highly innovative (over 80% of its growth has come from internal new product development), it has had difficulty controlling costs and is losing ground against powerful customers like Wal-Mart. JC believes that the market power it wields with retailers like Wal-Mart will help it turn Plastico's prospects around. -(Refer to Case Scenario 2) Why would the acquisition of Plastico be good for JC?

The main difference between the related constrained level of diversification and the related linked level of diversification is

The value of the assets of a firm using a diversification strategy to create both operational and corporate relatedness tend to be

Which of the following firms would be the most likely to be a successful candidate for acquisition and restructuring?

In a diversified firm, capital allocation can be adjusted according to more specific criteria than is possible with external market allocation of capital.

In the Chapter 6 Opening Case, GE achieved growth and diversification through mergers and acquisitions.

Xanadu, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same industry in Ireland. It plans to transfer one of its key managers from its plant in St. Louis to Ireland. What is the major threat to Xanadu's plan to transfer competencies from itself to the Irish firm?

Revenues for United Parcel Service (UPS) come from the following business segments: 60 percent from U.S. package delivery operations, 22 percent from international package delivery, and 18 percent from non-packaging operations. Which best describes the corporate level strategy of UPS?

Which of the following is NOT a limitation directly relating to vertical integration?

Operational relatedness is created by ___________of___________.

The more sharing of resources and activities among businesses, the more ____ is the relatedness of the diversification.