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Which of the following is NOT one of the elements of crafting corporate strategy for a diversified company? |
… |
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Diversifying into new businesses can be considered a success only if it |
Builds shareholder value |
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The three tests for judging whether a particular diversification move can create value for shareholders are |
The attractiveness test, the cost-of-entry test, and the better-off test |
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Which of the following is NOT a factor that makes it appealing to diversify into a new industry by forming an internal start-up subsidiary to enter and compete in the target industry? |
When the industry is growing rapidly and the target industry is comprised of several relatively large and well-established firms. |
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Diversifying into a new industry by forming a new internal subsidiary to enter and compete in the target is attractive when |
There is ample time to launch the new business from the ground up. |
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The essential requirement for different business to be "related" is that |
Their value chains possess competitively valuable cross-business relationships. |
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Which of the following is an important appeal of a related diversification strategy? |
Offers opportunities to transfer skills, expertise, technical know-how, or other capabilities from one business to another. |
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One strategic fit-based approach to related diversification would be to |
Diversify into new industries that present opportunities to combine value chain activities of two or more businesses to lower costs. |
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The best place to look for cross-business strategic fits is |
Anywhere along the respective value chains of related business – no one place is best. |
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Cross-business strategic fits can be found |
Anywhere along the respective value chains of related businesses. |
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Economies of scope |
Are costs reductions that flow from cost-saving strategic fits along the value chains of related businesses in the business lineup of a multibusiness corporation. |
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A diversified company that leverages the strategic fits of its related businesses into competitive advantage. |
Has a clear path to achieving 1 + 1 = 3 synergy gains in shareholder value. |
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The essential requirement for different businesses to be "related" is that |
Their value chains possess competitively valuable cross-business fit relationships. |
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A strategy of diversifying into unrelated business |
Discounts the importance of strategic fit and instead focuses on building and managing a group of businesses in attractive industries that can acquired on financial terms that allow for acceptable returns of investment. |
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Different businesses are said to be "unrelated" when |
There is an absence of competitively valuable strategic fits between their respective value chains. |
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The basic premise of unrelated diversification is that |
Any company that can be acquired on good financial terms and that has satisfactory earnings potential represents a good acquisition and a good business opportunity. |
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The two biggest drawbacks or disadvantages of unrelated diversification are |
Demanding managerial requirements and limited competitive advantage potential that cross-business strategic fit provides. |
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The two biggest drawbacks or disadvantages of unrelated diversification are |
The difficulties of competently managing a set of fundamentally different business and having a very limited competitive advantage potential that cross-business strategic fit provides. |
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The one factor that is NOT relevant for company managers to worry about when their company has many unrelated firms, especially when they are very diverse is to |
Pick business-unit heads having prerequisite combination of managerial skills and know-how to motivate people. |
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Which of the following is a diversified business with one major "core" business and a collection of small related or unrelated businesses? |
Dominant business enterprise. |
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Which of following is NOT a major consideration in evaluating the pluses and minuses of a diversified company’s strategy? |
Scrutinizing each industry/business to determine where driving forces are strongest/weakest and how many profitable strategic groups the company has diversified into. |
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Which of the following is NOT generally something that ought to be considered in evaluating the attractiveness of a diversified company’s business makeup? |
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. |
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When calculating industry attractiveness scores, to produce a valid response it is necessary to |
Ensure the appropriate weights are assigned each measure and that the preparer has sufficient knowledge to rate the industry on each attractiveness scores. |
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Assessments of how a diversified company’s subsidiaries compare in competitive strength should be based on such factors as |
Relative market share, ability to match or beat rivals on key product attributes, brand image and reputation, costs relative to competitors, and ability to benefit from strategic fits with sister businesses. |
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the value of determining the relative competitive strength of each business a company has diversified into is |
To have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries. |
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The basic purpose of calculating competitive strength scores for each of a diversified company’s business units is to |
Provide quantitative measure of the overall market strength and competitive standing for each business unit. |
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The most important strategy-making guidance that comes from drawing a nine-cell industry attractiveness-competitive strength matrix is |
That corporate resources should be concentrated on those business enjoying both a higher degree of industry attractiveness and competitive strength and that businesses having low competitive strength in relatively unattractive industries should be looked at for possible divestiture. |
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In a diversified company, the competitive advantage potential of cross-business strategic fit is greater when |
Valuable opportunities exists to transfer skills, technology, or intellectual capital from one business to another, combine the performance or related activities, or share the use of a well-respected brand name across multiple products or service categories. |
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Checking a diversified firm’s business portfolio for the competitive advantage potential of cross-business strategic fits entails consideration of |
The extent to which there are competitively valuable relationships between the value chains of sister business units and what opportunities they present to reduce costs, share use of a potent brand name, or transfer skills or technology or intellectual capital from one business to another. |
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Industry Attractiveness test |
The target industry presents good long-term profit opportunities. |
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Cost-of-entry test |
The costs of entering the target industry do not erode its long-term profit potential. |
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Better-off test |
The firm’s businesses will perform better together than as a stand-alone firm, producing a synergistic 1 + 1 = 3 effect on shareholder value. |
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What are the options for entering new industries and lines of business? |
Acquisition, internal development, and joint venture |
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What is a Cash Cow in the BCG matrix? |
Generates operating cash flows over and above its internal requirements. |
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Define Cash Hog |
Generates operating cash flows that are too small to fully fund its operations and growth; must receive cash infusions from outside sources to cover its capital and investment requirements. |
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What is a Star in the BCG matrix? |
A business unit that has a large market share in a fast growing industry. If successful, a star will become a cash cow when the industry matures. |
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What is a Question Mark (or Problem Child) in the BCG matrix? |
A business unit that has a small market share in a high growth market. |
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What is a Dog in the BCG matrix? |
A business unit that has a small market share in a mature industry. |
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What is a Multidivisional (M-form) structure? |
An organized structure in which the firm is separated into several semi-autonomous units; Choice for firms with moderate to high levels of product diversification |
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What are the three types on Multidivisional structures? |
1) Cooperative form. (Unrelated diversification) 2) Strategic Business Unit (SBU) form. (Corporate relations) 3) Competitive form. (Cooperating) |
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Which type of structure is the choice for firms with moderate to high levels of diversification? |
Multidivisional (M-form) structure |
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