Question 1

What are the primary benefits associated with unrelated diversification?

Accepted Answer

The primary potential benefits derive la...

Question 2

Vertical integration is attractive when

Accepted Answer

A)   transaction costs are higher than internal administrative costs.
B)   internal administrative costs are higher than transaction costs.
C)   transaction costs and internal administrative costs are equal.
D)   search costs are higher than monitoring costs.E) A) and B)
F) None of the above

Question 3

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

Accepted Answer

A)   joint diversification.
B)   strategic alliance.
C)   divestment.
D)   global integration.E) B) and D)
F) A) and B)

Question 4

A publishing company that purchases a chain of bookstores to sell its books is an example of unrelated diversification.

Accepted Answer

A) True 
 B)False

Question 5

Options exist when the owner of the option has

Accepted Answer

A)   the obligation, but not the right to engage in a transaction.
B)   the right, but not the obligation to engage in a transaction.
C)   the right and obligation to engage in a transaction.
D)   neither the right nor the obligation to engage in a transaction.E) A) and B)
F) C) and D)

Question 6

According to the text, the main source of synergy in unrelated diversification is the value created by the knowledge and expertise of the corporate office.

Accepted Answer

A) True 
 B)False

Question 7

Portfolio management frameworks (e.g., BCG matrix)  share which of the following characteristics?

Accepted Answer

A)   Grid dimensions are based on external environments and internal capabilities/market positions.
B)   Businesses are plotted on a 3-dimensional grid.
C)   Position in the matrix suggests a need for, or ability to share, infrastructures or build on core competences.
D)   They are most helpful in helping businesses develop types of competitive advantage.E) A) and C)
F) B) and D)

Question 8

When Rogers acquired Microcell, the clients of Fido, Microcell's brand name

Accepted Answer

A)   costs and associated expenses increased with expanded overhead and capital expenditures.
B)   instantly gained broader market coverage and better reception for their phones.
C)   problems developed with unbalanced capacities along the value chain.
D)   additional administrative costs associated with managing a more complex set of activities increased.E) All of the above
F) B) and C)

Question 9

Summarize the disadvantages of mergers and acquisitions as a means of diversification.

Accepted Answer

There are many potential downsides assoc...

Question 10

Corporate-level strategy addresses two related issues

Accepted Answer

A)   how to compete in a given business; the application of technology.
B)   what businesses to compete in; how these businesses can achieve synergy.
C)   how to integrate primary activities; increase shareholder wealth.
D)   how to improve a firm's infrastructure; how to maintain ethical behaviour.E) B) and C)
F) A) and B)

Question 11

Discuss how the potential benefits of diversification may be adversely affected by conflicts between managers' interests and shareholders' interests.

Accepted Answer

Frequently, managers may act in their ow...

Question 12

An advantage of mergers and acquisitions is that they can enable a firm to rapidly enter new product markets.

Accepted Answer

A) True 
 B)False

Question 13

Explain how transaction cost analysis can provide insights into vertical integration decisions.

Accepted Answer

According to this perspective, every mar...

Question 14

Risk reduction in and of itself is rarely a viable way to create shareholder value.

Accepted Answer

A) True 
 B)False

Question 15

What are the primary benefits associated with related diversification?

Accepted Answer

The primary potential benefits to be der...

Question 16

What are some of the key issues to take into account when considering whether or not to vertically integrate?

Accepted Answer

The benefits of vertical integration inc...

Question 17

Transaction costs include all of the following costs except

Accepted Answer

A)   search costs.
B)   negotiating costs.
C)   monitoring costs.
D)   agency costs.E) A) and C)
F) A) and B)

Question 18

According to the text, Canfor Corporation of Vancouver is a good example from the forest industry of having followed a successful strategy, to expand across markets, of

Accepted Answer

A)   capital restructuring and technology restructuring.
B)   asset restructuring.
C)   horizontal integration.
D)   vertical integration.E) A) and B)
F) A) and C)

Question 19

_______ is 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.

Accepted Answer

A)   Parenting
B)   Restructuring
C)   Leveraging core competencies
D)   Sharing activitiesE) A) and B)
F) A) and C)

Question 20

Through joint ventures, firms can directly acquire the assets and competencies of other firms.

Accepted Answer

A) True 
 B)False

Exam 6: Corporate-Level Strategy: Creating Value Through Diversification

Summarize the disadvantages of mergers and acquisitions as a means of diversification.

Correct AnswerverifiedThere are many potential downsides assoc...View AnswerShow Answer

Vertical integration is attractive when

Correct AnswerverifiedShow Answer

An advantage of mergers and acquisitions is that they can enable a firm to rapidly enter new product markets.

Correct AnswerverifiedShow Answer

Through joint ventures, firms can directly acquire the assets and competencies of other firms.

Correct AnswerverifiedShow Answer

When Rogers acquired Microcell, the clients of Fido, Microcell's brand name

Correct AnswerverifiedShow Answer

According to the text, Canfor Corporation of Vancouver is a good example from the forest industry of having followed a successful strategy, to expand across markets, of

Correct AnswerverifiedShow Answer

Transaction costs include all of the following costs except

Correct AnswerverifiedShow Answer

Discuss how the potential benefits of diversification may be adversely affected by conflicts between managers' interests and shareholders' interests.

Correct AnswerverifiedFrequently, managers may act in their ow...View AnswerShow Answer

_______ is 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.

Correct AnswerverifiedShow Answer

What are the primary benefits associated with unrelated diversification?

Correct AnswerverifiedThe primary potential benefits derive la...View AnswerShow Answer

Explain how transaction cost analysis can provide insights into vertical integration decisions.

Correct AnswerverifiedAccording to this perspective, every mar...View AnswerShow Answer

Portfolio management frameworks (e.g., BCG matrix) share which of the following characteristics?

Correct AnswerverifiedShow Answer

A publishing company that purchases a chain of bookstores to sell its books is an example of unrelated diversification.

Correct AnswerverifiedShow Answer

What are some of the key issues to take into account when considering whether or not to vertically integrate?

Correct AnswerverifiedThe benefits of vertical integration inc...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Risk reduction in and of itself is rarely a viable way to create shareholder value.

Correct AnswerverifiedShow Answer

According to the text, the main source of synergy in unrelated diversification is the value created by the knowledge and expertise of the corporate office.

Correct AnswerverifiedShow Answer

Corporate-level strategy addresses two related issues

Correct AnswerverifiedShow Answer

What are the primary benefits associated with related diversification?

Correct AnswerverifiedThe primary potential benefits to be der...View AnswerShow Answer

Options exist when the owner of the option has

Correct AnswerverifiedShow Answer

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There are many potential downsides assoc...
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Frequently, managers may act in their ow...
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The primary potential benefits derive la...
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According to this perspective, every mar...
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The benefits of vertical integration inc...
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The primary potential benefits to be der...
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