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Which of the following statements is false?


A) Joint ventures are preferable to acquisitions when the new business is related to the existing business.
B) Acquisitions are preferable to new ventures when speed is important.
C) Joint ventures are generally preferable to acquisitions when entry barriers are high.
D) Acquisitions can be both a reason for corporate decline and part of a turnaround strategy.
E) New ventures are preferable to acquisitions in the embryonic stage of the industry life cycle.

Correct Answer

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Internal venturing is a more attractive strategy than acquisitions when:


A) entry barriers are high.
B) exit barriers are high.
C) a company's business model is based on using its technology or design skills to innovate new kinds of products and enter related markets or industries.
D) it needs to move fast to establish a presence in an industry, commonly an embryonic or growth industry.
E) the company must make the huge investment necessary to develop the set of value-chain activities required to make and sell products in the new industry.

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The amount of value that can be created through an internal capital market is directly proportional to the efficiency of the external capital market. This is because an internal capital market strategy makes money as managers cannot make better investment decisions within the firm than the external capital market would, often because they don't have the superior information that the external capital market.

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Which of the following involves taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry?


A) Sharing resources and capabilities
B) Leveraging competencies
C) Transferring competencies
D) Product bundling
E) Strategic management capabilities

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Which of the following is instrumental in increasing the probability of a joint venture's success?


A) When the companies share complementary skills or distinctive competencies
B) The companies bidding strategy is well-developed and timed correctly
C) The duplication of facilities or functions are eliminated, and any unwanted business units are divested
D) Companies have a strong competency in the R&D unit and devote funding for continuing research
E) Large-scale entry

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Which of the following is NOT a reason that explains the relatively high failure rate of internal new ventures?


A) Businesses choose a small-scale entry strategy, which often means they fail to build the market share necessary for long-term success.
B) A company is marketing a product based on a technology for which there is no demand.
C) The company fails to correctly position or differentiate the product in the market to attract customers.
D) A company tries to increase their chances of introducing successful products by establishing too many internal new-venture divisions.
E) Companies are focused on and excel at R&D in which they help to advance basic science and discover important commercial applications for it.

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Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue?


A) Steady industry conditions
B) Varying firm-specific conditions
C) Diversification for pooling risks
D) Decreasing bureaucratic costs
E) Greater differentiation of products

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Microsoft's relationships and experiences in the computer industry and expertise in managing industries surrounding external networks led them to create new business units in the video game, online portal, and search engine industries. This is an example of which of the following?


A) Sharing resources and capabilities
B) Leveraging competencies to create a new business
C) Transferring competencies across businesses
D) Utilizing general organizational competencies
E) Economies of scope

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In a company with a strategic organizational competency, they are able to create new, profitable business units more quickly than do other companies and this allows them to take advantage of profitable opportunities for diversification.

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Which of the following is the probable consequence of a company's inability to integrate two divergent corporate cultures after an acquisition?


A) Low management turnover
B) Poor commercialization of the product
C) An inability to realize potential gains from synergies
D) The stock of highly diversified companies is valued lower
E) Risks are shared by all

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If a company is to increase the probability of a new product's commercial success, the company must foster close links between:


A) marketing and sales.
B) engineering and advertising.
C) quality assurance and inventory management.
D) research and development (R&D) and marketing.
E) accounting and industrial engineering.

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At Burger King, multiple items such as a cheeseburger, french fries, and a drink are combined to create a complete meal. This is an example of diversification.

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When Coca-Cola decided to use its successful marketing experience and global distribution network to buy Colombia Pictures and get into the business of making movies, which of the following ways of pursuing a multibusiness model based on diversification was it utilizing?


A) Sharing resources and capabilities
B) Leveraging competencies to create a new business
C) Transferring competencies across businesses
D) Utilizing general organizational competencies
E) Economies of scope

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In order to make a successful acquisition, which of the following would occur after a detailed assessment of the potential acquisition's strengths and weaknesses?


A) Generation of significant value from the experience of the acquisition process
B) Eliminating any duplication of facilities or functions
C) Integration of the acquired company into its operations and quickly develop a viable multibusiness model
D) Targeting an identification and pre-acquisition screening
E) Developing and initiating a bidding strategy

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A company can increase the probability of success of an internal venture by constructing efficient-scale manufacturing facilities ahead of demand.

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The three main types of diversification strategies are:


A) acquisitions, joint ventures, and divestments.
B) acquisitions, mergers, and buyouts.
C) acquisitions, internal new ventures, and joint ventures.
D) related acquisitions, unrelated acquisitions, and mergers.
E) joint ventures, strategic alliances, and long-term contracts.

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When Philip Morris used its distinctive competencies in product development, consumer marketing, and brand positioning to help develop their new acquisition of Miller Brewing from small brewery to number two in market share, it is called sharing resources and capabilities.

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Which of the following is NOT a general organizational competency?


A) Entrepreneurial capabilities
B) Organizational design capabilities
C) Strategic capabilities
D) Product bundling
E) Commonality

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Which of the following is NOT necessary for a successful acquisition?


A) Good bidding strategy
B) Clear strategic rationale for making the acquisition
C) Quick completion of the acquisition
D) Thorough pre-acquisition screening
E) Post-acquisition audit to review the process and discuss ways to improve it

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Which of the following is a justification that a business adopts to justify diversification?


A) The strategy would allow a company to save themselves from the drawbacks of risk pooling.
B) Entry into new industries will rescue the core business and lead to long-term growth and profitability.
C) It decreases the range of threats the company encounters, and gives more time to managers had to spend dealing with these threats.
D) Business cycles of different industries are inherently easy to predict, so it is likely that a diversified company will find that an economic downturn affects only one of its business units.
E) Growth creates value for stockholders and growth is the objective of a diversification strategy.

Correct Answer

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