BUSI 690 Policy & Strategy in Global Companies/ Fall 2020/ Professor A. Blossom Chp 7-9
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1. Corporate parents effectively contribute to the success of their businesses by
A. duplicating administrative positions within each business
B. utilizing popular umbrella brands
C. creating value through the increase of companywide overhead costs
D. providing general resources that lower their operating costs
2. Cross-business strategic fit can exist
A. at various points alone the value chain
B. In supply chain activities
C. at only one point along the value chain
D. in customer service activities
3. Entering a new business via a joint venture can be useful in which of the following
situations?
A. when diversification entails operations in a foreign country
B. when both companies have different visions for product development
C. when an opportunity in a new industry requires more know-how than
one company has alone
D. when an opportunity is too complicated or risky for one company to
attempt alone
4. Examples of opportunities for strategic fit include
A. transferring specialized expertise form the value chain of one business to
another
B. ensuring that a business’s resources remain the sole property of that business
throughout the diversification process
C. sharing costs between businesses by combining their related value chain
activities into a single operation
D. exploiting the common use of a well-known brand name
5. In an unrelated diversification strategy, managers must make sure acquisition candidate
have which of the following characteristics?
A. They are in an industry with attractive growth potential
B. They are big enough to significantly contribute to the parent company’s
bottom line
C. They have a potential growth in profits equal to that of a mutual fund or
holding company
D. They meet corporate targets for profitability and return on investment
6. Internal development of a new business is a good idea when which of the following
conditions are met?
A. There is plenty of time to start the business
B. Incumbent firms are likely to respond quickly to a new entrant into the market
C. It is cheaper to enter internally than through an acquisition
D. The parent company has the in-house resources needed to launch the
company
7. In order to pass the three tests of corporate advantage, executives must
A. Diversity into industries where the businesses can produce consistently
good earnings and return on investment
B. negotiate favorable acquisition prices
C. do a superior job of corporate parenting via high-level managerial
BUSI 690 Policy & Strategy in Global Companies/ Fall 2020/ Professor A. Blossom Chp 7-9
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oversight
D. acquire a growing number of companies in successive years
8. Steps involved in assessing the positive and negative aspects of a diversified company
strategy and determining how to improve performance include which of the
following?
A. Determining if the firm’s resources fir the requirements of its current
business line-up
B. Eliminating the previous management team and selecting leaders with strength
in specialized areas
C. Evaluating the individual and group attractiveness of the industries the
company has diversified into
D. Determining the competitive strength of the company’s business units
9. The steps involved in creating a diversified company’s corporate strategy include
A. picking new industries to enter and the means for entering them
B. Establishing investment priorities
C. Leveraging cross-business value chain relationships into competitive
advantage
D. requiring corporate executives to become involved in all details of business-
level strategies
10. Which of the following actions should a company consider according to the nine-cell
attractiveness-strength matrix?(Check all that apply.)
A. To withdraw capital resources from companies that are not evenly matched in
industry attractiveness and business strength
B. To be cautious about investing in companies located intermediately on the
grid
C. To remove resources from ventures that are low in attractiveness and
strength unless they offer superior profit or cash flow
opportunity
D. To concentrate resources in businesses that possess higher degrees of
attractiveness and competitive strength
11. Which of the following allow businesses with strategy fit in supply chain activities
perform better together? (Check all that apply.)
A. Obtaining volume discounts on incoming components
B. Cooperating with common supply chain partners
C. Sharing logistical resources
D. Using a single sales force for all the businesses’ products
12. Which of the following are among the four questions that need to be asked when
determining how best to enter a new business?
A. Which is the least costly mode of entry, given the company’s objectives?
B. Is speed an important factor in the firm’s chances for successful entry?
C. Will the choice be popular with most employees?
D. Are there entry barriers to overcome?
13. Which of the following are benefits of acquisition?
A. It is a useful way to get over entry barriers, such as building brand
awareness
B. It creates a longer period of time to develop adequate scale of operation
BUSI 690 Policy & Strategy in Global Companies/ Fall 2020/ Professor A. Blossom Chp 7-9
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C. It allows access to hard-to-find resources and capabilities that work well
with those of the acquiring company
D. It is quicker than trying to launch a new operation
14. Which of the following are drawbacks of acquisition?
A. There are often excessive premiums
B. Integration of the company into the existing firm can be time consuming
C. It can quickly establish supplier relationships
D. There can be high integration costs
15. Which of the following are strategic options for increasing a corporation’s overall
success?
A. retrenching to a narrower scope of diversification by divesting poorly
performing businesses
B. Sticking closely with the existing business lineup and pursuing
opportunities presented by these businesses
C. avoiding any restructuring that might put a new face on the company’s
business line-up
D. broadening the scope of diversification by entering additional industries
16. Which of the following are terms refer to diversification by starting a new business
subsidiary from scratch?
A. acquisition premium
B. internal development
C. corporate venturing
D. new venture development
17. Which of the following are the ways a company can enter a new business?
A. internal startup
B. joint ventures
C. acquisition
D. margin buying
18. Which of the following are true of related businesses?
A. They have similar resources and capabilities
B. They have compatible value chain activities
C. They can be combined to perform better than the sum of the individual
businesses
D. They have different resource requirements
19. Which of the following are true of the nine-cell attractiveness-strength matrix?
(Check all that apply.)
A. It accurately calculates the probability of a business failing within the next
five years.
B. It identifies the industry attractiveness of businesses
C. It helps diversified companies allocate resources among their businesses
D. It identifies the business strength of businesses
E. It helps craft new strategic moves to improve overall corporate performance
20. Which of the following are questions to ask when evaluating industry attractiveness?
A. Does each industry the company has diversified into represent a good
market for the company to be in?
B. How many years has the company been involved in each industry?
BUSI 690 Policy & Strategy in Global Companies/ Fall 2020/ Professor A. Blossom Chp 7-9
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C. Which of the company’s industries are most attractive?
D. How appealing is the whole group of industries in which the company has
invested?
21. Which of the following statements are true about a successful diversification effort?
A. It must focus purely on spreading risk
B. It must provide more value than real estate investments
C. It must give shareholders value that they cannot get by purchasing
different stocks on their own
D. It must add long-term economic value for shareholders
22. Which of the following statements are true of economies of scope? (Check all that
apply.)
A. They are directly related to a business’s size rather than to level of
diversification
B. They result from strategic fit among related businesses allowing the
sharing of the resources among diversified businesses
C. They are a distinct concept from economies of scale
D. They are cost savings that accrue directly from a larger-sized operation
E. They are available only to firms engaging in related diversification
23 Which of the following statements are true of multi-business diversification strategies?
A. Some multi-business enterprises are diversified into unrelated areas but
have a group of related businesses within each area
B. In dominant-business enterprises, no single business generates more than 25%
of the overall revenues
C. Combination related-unrelated diversification strategies are attractive to
companies with a mix of valuable competitive assets.
D. Some companies are narrowly diversified around two to five related or
unrelated businesses
24. Which of the following statements are true of unrelated diversification?
A. Problems can occur when corporate management makes decisions for
businesses they do not know well
B. A very small number of unanticipated problems or mistakes can have a
major negative effect on corporate earnings
C. Most management teams are not capable of effectively managing a
diversified group of unrelated businesses
D. The overwhelming majority of companies that undertake unrelated
diversification succeed because of its distribution of risk
25. Which of the following would be misguided reasons for pursuing unrelated
diversification?
A. boosting managerial compensation
B. reducing earnings volatility
C. risk reduction
D. building shareholder value
26. Select all that apply
What questions can be answered by determining the competitive value of strategic fit in
diversified companies?
BUSI 690 Policy & Strategy in Global Companies/ Fall 2020/ Professor A. Blossom Chp 7-9
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A. Are there other unrelated businesses that can be added to the company’s
holdings for the purposes of gaining a strategic fit?
B. Will leveraging a potent umbrella brand or corporate image strengthen
the businesses and increase sales?
C. Are the cost savings associated with economies of scope likely to give one
or more businesses a cost-based advantage?
D. How much competitive value will come from the cross-business transfer
of skills, technology, or intellectual capital?
27. Select all that apply
Which of the following statements are true concerning the ranking of a diversified
company’s business units from best to worst?
A. Future revenue and earnings for fast-growing industries usually look
superior to those for slow-growing industries
B. The position of different businesses in the nine-cell matrix is a good
criteria for identifying high-opportunity and low opportunity
businesses
C. The rankings help high-level executives prioritize businesses for resource
support and capital investment.
D. It is not necessary to take into account past performance of a business unit if
the nine-cell matrix is used properly
28. Select all that apply
The brand categories of action for crafting strategic moves to improve a diversified
company’s overall performance include:
A. divesting certain businesses and retrenching to a narrower base of
business operations
B. Building cash reserves and investing in short-term securities
C. Sticking closely with the existing business lineup and pursuing
opportunities that those businesses present
D. Widening the company’s business scope by making new acquisitions in
new industries
29. A diversified company in which one core business accounts for 50% to 80% of total
revenues and other businesses account for the remainder is known as
A. an emerging enterprise
B. a dominant business enterprise
C. a single-business enterprise
D. a broadly diversified enterprise
30. A good resource fit would include solid parenting capabilities in companies that
pursue which of the following?
A. low employee turnover rate
B. high industry attractiveness
C. a related diversification strategy
D. an unrelated diversification strategy
31. After a evaluating the strength, attractiveness, and fit of a diversified company’s
strategy, the next move is to
A. rank the performance potential of the businesses
BUSI 690 Policy & Strategy in Global Companies/ Fall 2020/ Professor A. Blossom Chp 7-9
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B, classify each business as a cash hog or a cash cow
C. evaluate each business’s brand recognition
D. rank each of the businesses in terms of how long the company has held them.
32. Businesses are said to be related when
A. customers make a brand associates linking them
B. their value chains exhibit competitively important cross-business
commonalities
C. they use similar marketing strategies
D. one business cannot function without resources or supplies provided by the
other
33. Choosing how best to enter a new business
A. depends partially on determining the least costly mode of entry
B. is best determined by the intuition of upper management
C. has no accepted set of guiding criteria or questions to ask
D. is based solely on identifying entry barriers
34. Companies practicing unrelated diversification overwhelmingly enter new businesses
by
A. obtaining an established company
B. selling their trade secrets to another company in exchange for a share of that
company’s profits
C. participating in joint ventures
D. forming a start up subsidiary within their own corporate structure
35. Corporate brands that do not have a connotation of any specific type of product are
known as
A. generic brands
B. scale brands
C. Scope brands
D. umbrella brands
36. Determining the competitive value of strategic fit in diversified companies
A. Can be bypassed for competition with related businesses
B. Is important in evaluating their related diversification strategies
C. Is most useful for companies with unrelated businesses
D. Is based on the skills and other assets that cannot be shared between related
businesses
37. Diversified companies that are able to create more value in their businesses than other
diversified companies have what is called
A. a parenting advantage
B. an advantage of fit
C. an unrelated advantage
D. a related advantage
38. Diversifying into new industries
A. is generally regarded as last-ditch strategy to save a failing company
B. is a poor idea when a single-business company sees stagnating sales in its
principal business
C. should be explored when a single-business company encounters
BUSI 690 Policy & Strategy in Global Companies/ Fall 2020/ Professor A. Blossom Chp 7-9
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dwindling opportunities in its principal business
D. becomes urgent when a company has plentiful opportunities for growth in its
present industry
39. Diversification is not really viewed as a success unless it .
A. Yields added long-term economic value for shareholders
B. more than doubles the annual cash flow of a company
C. Results in short-term gains for shareholders
D. Lowers the overall tax burden on a company
40. In order to be a good market for a company to be in, an industry should
A. Have broad internal diversification
B. pass the industry attractiveness test
C. be recovering from a period of steep decline
D. have been around for at least a decade
41. Strategic fit
A. refers to a diversification strategy used with unrelated businesses
B. prevents one company form usurping the resources of another
C. ensures that each company’s resources are only fitted to suit its value chain
activities
D. allows cross-business sharing of resources that enable value chain
activities
42. Strategic analysis of diversified companies
A. serves a basis to build on when analyzing single-business companies
B. requires mastery of fewer analytic tools than single-business companies
C. Builds on the same ideas and techniques used for analyzing single-
business companies
D. requires three steps
43. The crafting of strategic moves to improve a diversified company’s overall
performance
A. can be determined by using a nine-cell matrix
B. can be applied only to diversification into unrelated businesses
C. all fall under the category of broadening a company’s scope
D. can be placed into four broad categories of action.
44. The decision to diversify should begin with
A. a demand from dissatisfied shareholders
B. an economic justification
C. a desire to expand creativity and expression
D. a moral justification
45. The means of entering a new business by buying an existing is referred to as
A. bankruptcy
B. acquisition
C. Joint venture
D. Internal startup
46. Unrelated diversification strategies
BUSI 690 Policy & Strategy in Global Companies/ Fall 2020/ Professor A. Blossom Chp 7-9
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A. tend to have more overall successes than failures
B. are fairly safe ways to diversify from a management point of view
C. tend to have more overall failures than successes
D. are highly suited for handling unforeseen problems and strategic mistakes
47. When a firm with a related diversification strategy has businesses that match
specialization resource requirements at points along their value chains that are
critical for the business’s market success, they are said to have
A. moderated growth potential
B. Competitive value
C. Resource fit
D. corporate parenting
48. Which of the following is true about joint ventures?
A. They are the most durable of the diversification options
B. They are successful only if the companies involved are both domestic
companies
C. They are usually short-lived ending as soon as the partners decide to part
ways
D. They tend to decrease conflict and disagreement within management
49. Which of the following is true of economies of scope?
A. They are cost savings that accrue directly from a larger-sized operation
B. They come directly from strategic fit along the value chains of related
businesses
C. They increase the costs of transferring resources among related businesses
D. They are no longer possible once a company becomes diversified
50. Which statement is true concerning the pursuit of growth through unrelated
diversification?
A. It works well as long as the growth is pursued for growth’s sake
B. It should be undertaken without considering the effects on shareholder value
C. It can be misguided if the growth is not profitable growth
D. It eliminates the risk that the parent company will fail
