Exam 8: Corporate Strategy: Diversification and the Multibusiness Company

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.

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A) The ability to broaden the company's product line.
B) The opportunity to convert cross-business strategic fits into competitive advantages 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.

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B

A) which industries appear to be the best and worst ones to be in and the attractiveness of all the industries as a group from the standpoint of the company's long-term performance and market strength.
B) which industries have attractive key success factors and which industries have unattractive key success factors.
C) which industries have the biggest economies of scale and which industries have the greatest economies of scope and the overall potential for cost reduction in the industries as a group.
D) which industries are most attractive from the standpoint of long-term growth and the growth prospects of all the industries as a group.
E) which industries are most attractive from the standpoint of industry driving forces and competitive forces.

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A) Assessing the attractiveness of the industries the company has diversified into.
B) Assessing the competitive strength of each business unit to see which ones are the strongest/weakest contenders in their respective industries.
C) Ranking the performance prospects of the various businesses from best to worst and determining the priorities for resource allocation.
D) Checking the competitive advantage potential of cross-business strategic fits and also checking whether the firm's resources fit the needs of its present business lineup.
E) Ranking all the company's former strategic moves that were designed to improve overall corporate performance.

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A) When the business is worth more to another company than to the parent company.
B) When the parent company would want to get into that business if it were not already in it.
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.

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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.

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A) acquire new businesses that utilize much the same technology as existing businesses.
B) divest businesses whose competitive strategies do not match the overall competitive strategy of the corporation.
C) acquire new businesses having attractive distribution-related and customer-related strategic fits with existing businesses.
D) spot bargain-priced companies with big upside potential and then turn around their operations quickly with the aid of the parent company's financial resources and managerial know-how.
E) identify potential new acquisition candidates that are cash cows (as opposed to cash hogs) .

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A) Does the company have all of the resources and capabilities it requires to enter the business through internal development or is it lacking some critical resources?
B) Are there entry barriers to overcome?
C) Is speed an important factor in the firm's chances for successful entry?
D) How much money will the company make in the first year?
E) Which is the least costly mode of entry,given the company's objectives?

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A) A strategic fit in sales and marketing activities.
B) A strategic fit in customer service activities.
C) A distribution-related strategic fit.
D) A manufacturing-related strategic fit.
E) A strategic fit in R&D and technology activities.

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A) the transferring of valuable resources and capabilities.
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.

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C

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.

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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,the extent to which firms in the industry utilize outsourcing,and whether the industries a company has diversified into have common key success factors.
D) Seasonal and cyclical factors,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.

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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) All of these.

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A) to pay a very high premium to convince shareholders and managers of the target company to reject the deal.
B) spending the required amount on integrating the firms is worth the effort.
C) to pay a premium price for a successful company or to buy a struggling company at a discounted price.
D) they have the experience and wherewithal to execute an acquisition's integration plan at below the budgeted plan.
E) All of these.

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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 relationships at the value chain level.
C) perform better than just the sum of its individual businesses.
D) will always have several key suppliers in common.
E) employ production methods that create economies of scale.

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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.

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