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Lecture 11

ADMS 4501 Lecture 11: TBB-6

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Department
Administrative Studies
Course Code
ADMS 4501
Professor
Lois King

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6 1. Corporate-level strategy addresses two related issues: 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. 2. For a core competence to be a viable basis for the corporation strengthening a new business unit, there are three requirements. Which one of the following is not one of these requirements? A. The competence must help the business gain strength relative to its competition. B. The new business must be similar to existing businesses to benefit from a core competence. C. The collection of competencies should be unique, so that they cannot be easily imitated. D. The new business must have an established large market share. 3. Sharing core competencies is one of the primary potential advantages of diversification. In order for diversification to be most successful, it is important that A. the similarity required for sharing core competencies must be in the value chain, not in the product. B. the products use similar distribution channels. C. the target market is the same, even if the products are very different. D. the methods of production are the same. 4. When management uses common production facilities or purchasing procedures to distribute different but related products, they are A. building on core competencies. B. sharing activities. C. achieving process gains. D. using portfolio analysis. 5. __________ reflect the collective learning in organizations such as how to coordinate production skills, integrate multiple streams of technologies, and market and merchandise diverse products and services. A. Primary value chain activities B. Cultures C. Core competencies D. Horizontal integrations 6. It may be advantageous to vertically integrate when A. lower transaction costs and improved coordination are vital and achievable through vertical integration. B. the minimum efficient scales of two corporations are different. C. flexibility is reduced, providing a more stationary position in the competitive environment. D. various segregated specializations will be combined. 7. When Rogers acquired Microcell, the clients of Fido, Microcell's brand name 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. 8. Unbalanced capacities that limit cost savings, difficulties in combining specializations, and reduced flexibility are disadvantages associated with A. strategic alliances. B. divestment. C. vertical integration. D. horizontal integration. 9. A firm should consider vertical integration when A. the competitive situation is highly volatile. B. customer needs are evolving. C. the firm's suppliers willingly cooperate with the firm. D. the firm's suppliers of raw materials are often unable to maintain quality standards. 10. Transaction costs include all of the following costs except A. search costs. B. negotiating costs. C. monitoring costs. D. agency costs. 11. Vertical integration is attractive when 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. 12. _______ 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. A. Parenting B. Restructuring C. Leveraging core competencies D. Sharing activities 13. 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 A. capital restructuring, and technology restructuring. B. asset restructuring. C. horizontal integration. D. vertical integration. 14. Portfolio management matrices are applied to what level of strategy? A. departmental level B. business level C. corporate level D. international level 15. When using a BCG matrix, a business that currently holds a large market share in a rapidly growing market and that has minimal or negative cash flow would be known as a A. cow. B. dog. C. problem child. D. star. 16. In the BCG (Boston Consulting Group) Matrix, a business that has a low market share in an industry characterized by high market growth is termed a A. star. B. question mark. C. cash cow. D. dog. 17. Portfolio management frameworks (e.g., BCG matrix) share which of the following characteristics? 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. 18. Molson of Montreal and Coors of Colorado merged their operations in order to stand up to A. continued diversification in the beverage market. B. competition from Japan. C. continuing consolidation in the global beer industry. D. substantial cash outlays to maintain market share. 19. The downsides or limitations of mergers and acquisitions include all of the following except: A. expensive premiums that are frequently paid to acquire a business. B. difficulties in integrating the activities and resources of the acquired firm into a corporation's on-going operations. C. it is a slow means to enter new markets and acquire skills and competences. D. there can be many cultural issues that can doom an otherwise promising acquisition. 20. Cooperative relationships such as _______ have potential advantages such as entering new markets, reducing manufacturing (or other) costs in the value chain, and developing and diffusing new technologies. A. joint ventures B. mergers and acquisitions C. strategic alliances D. joint ventures and strategic alliances 21. 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 A. joint diversification. B. strategic alliance. C. divestment. D. global integration. 22. Loblaw, with a strong presence in Ontario and Western Canada, gained a footprint into the Quebec market by A. establishing a clear understanding between partners. B. acquiring Provigo. C. not shortchanging your partner. D. working hard to ensure a collaborative relationship between partners. 23. Options exist when the owner of the option has 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. 24. Real options analysis is most appropriate when A. the total investment required is small, but the environment is uncertain. B. the investment required can be justified by Discounted Cash Flow (DCF) techniques. C. a small investment upfront can be followed by a series of subsequent investments. D. there is no prospect of obtaining additional knowledge before making subsequent investments. 25. Which of the following statements regarding internal development as a means of diversification is false? A. Many companies use internal development to extend their product lines or add to their service offerings. B. An advantage of internal development is that it is generally faster than other means of diversification and firms can benefit from speed in developing new products and services. C. The firm is able to capture the wealth created without having to "share the wealth" with alliance partners. D. Firms can often develop products or services at a lower cost if they rely on their own resources instead of external funding. 26. An antitakeover tactic called (a) ___________ is when a firm offers to buy shares of their stock from a company planning to acquire their firm at a higher price than the unfriendly company paid for it. A. golden parachute B. greenmail C. poison pill D. scorched earth 27. An antitakeover tactic called greenmail is A. encouraged in Canada. B. prohibited in Canada. C. only allowed in Quebec. D. borrowed from NAFTA. 28. The term "golden parachute" refers to A. a clause requiring that huge dividend payments be made upon takeover. B. financial inducements offered by a threatened firm to stop a hostile suitor from acquiring it. C. managers of a firm involved in a hostile takeover approaching a third party about making the acquisition. D. pay given to executives fired because of a takeover. 29. When Canadian family-controlled firm Schneider's wanted to block Maple Leaf Foods, they looked to Springfield as a A. greenmail. B. golden parachute. C. white knight. D. poison pill. 30. A newly acquired business must always have products that are similar to the existing businesses' products to benefit from the corporation's core competence. True False 31. Sharing activities across business units can provide two primary benefits: cost savings and revenue enhancements. True False 32. The two principal means by which firms achieve synergy through market power are: pooled negotiating power and corporate parenting. True False 33. Similar businesses working together or the affiliation of a business with a strong parent can strengthen a firm's bargaining position relative to suppliers and customers. True False 34. A publishing company that purchases a chain of bookstores to sell its books is an example of unrelated diversification. True False 35. One of the risks of vertical integration is that there may be problems associated with unbalanced capacities or unfilled demands along a firm's value chain. True False 36. Vertical integration is attractive when market transaction costs are higher than internal administrative costs. True False 37. 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. True False 38. Restructuring requires the corporate office to find either poorly performing firms with unrealized potential or firms in industries on the threshold of significant, positive change. True False 39. Portfolio management should be considered as the primary basis for formulating corporate-level strategies. True False 40. Portfolio management matrices generally consist of two axes that reflect industry or market growth and the market share of a business. True False 41. Risk reduction in and of itself is rarely a viable way to create shareholder value. True False 42. Through joint ventures, firms can directly acquire the assets and competencies of other firms. True False 43. An advantage of mergers and acquisitions is that they can enable a firm to rapidly enter new product markets. True False 44. Upon the acquisition of Microcell, Rogers was able to immediately obtain savings. True False 45. The potential advantages of strategic alliances and joint ventures include entering new markets as well as developing and diffusing new technologies. True False 46. For strategic alliances to be effective, reliance on written contracts to delimit responsibilities and enforce compliance is vital. True False 47. An advantage of internal development is that firms do not have to combine activities across the value chains of many companies and merge company cultures. True False 48. Real options analysis helps managers make investment decisions involving large irreversible commitments of financial resources. True False 49. Greenmail is an offer by a company, threatened by takeover, to offer its stock at a reduced price to a third party. True False 50. A golden parachute is a prearranged contract with managers specifying that in the event of a hostile takeover, the target firm's managers will be paid a significant severance package. True False 51. What are the primary benefits associated with related diversification? 52. What are the primary benefits associated with unrelated diversification? 53. Briefly explain the advantages of vertical integration. 54. What are some of the key issues to take into account when considering whether or not to vertically integrate? 55. Explain how transaction cost analysis can provide insights into vertical integration decisions. 56. Explain the limitations of portfolio management matrices such as the growth-share matrix developed by the Boston Consulting Group (BCG). 57. Summarize the disadvantages of mergers and acquisitions as a means of diversification. 58. Strategic alliances are arrangements in which two firms join forces and form a cooperative partnership. Discuss the potential advantages of strategic aliances. 59. What is Real Options Analysis (ROA) and how can it be used by strategic decision makers? 60. Discuss how the potential benefits of diversification may be adversely affected by conflicts between managers' interests and shareholders' interests. 6 Key 1. Corporate-level strategy addresses two related issues: (p. 152) 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. Dess - Chapter 06 #1 Learning Objective: 1 2. For a core competence to be a viable basis for the corporation strengthening a new business (p. 153-unit, there are three requirements. Which one of the following is not one of these 154) requirements? A. The competence must help the business gain strength relative to its competition. B. The new business must be similar to existing businesses to benefit from a core competence. C. The collection of competencies should be unique, so that they cannot be easily imitated. D. The new business must have an established large market share. Dess - Chapter 06 #2 Learning Objective: 2 3. Sharing core competencies is one of the primary potential advantages of diversification. In (p. 153- 154) order for diversification to be most successful, it is important that A. the similarity required for sharing core competencies must be in the value chain, not in the product. B. the products use similar distribution channels. C. the target market is the same, even if the products are very different. D. the methods of production are the same. Dess - Chapter 06 #3 Learning Objective: 2 4. When management uses common production facilities or purchasing procedures to distribute (p. 155) different but related products, they are A. building on core competencies. B. sharing activities. C. achieving process gains. D. using portfolio analysis. Dess - Chapter 06 #4 Learning Objective: 2 5. __________ reflect the collective learning in organizations such as how to coordinate (p. 153) production skills, integrate multiple streams of technologies, and market and merchandise diverse products and services. A. Primary value chain activities B. Cultures C. Core competencies D. Horizontal integrations Learning Objective: 2 6. It may be advantageous to vertically integrate when (p. 158) A. lower transaction costs and improved coordination are vital and achievable through vertical integration. B. the minimum efficient scales of two corporations are different. C. flexibility is reduced, providing a more stationary position in the competitive environment. D. various segregated specializations will be combined. Learning Objective: 2 7. When Rogers acquired Microcell, the clients of Fido, Microcell's brand name (p. 155) 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. Dess - Chapter 06 #7 Learning Objective: 2 8. Unbalanced capacities that limit cost savings, difficulties in combining specializations, and (p. 159)reduced flexibility are disadvantages associated with A. strategic alliances. B. divestment. C. vertical integration. D. horizontal integration. Dess - Chapter 06 #8 Learning Objective: 2 9. A firm should consider vertical integration when (p. 159) A. the competitive situation is highly volatile. B. customer needs are evolving. C. the firm's suppliers willingly cooperate with the firm. D. the firm's suppliers of raw materials are often unable to maintain quality standards. Dess - Chapter 06 #9 Learning Objective: 2 10. Transaction costs include all of the following costs except (p. 160) A. search costs. B. negotiating costs. C. monitoring costs. D. agency costs. Dess - Chapter 06 #10 Learning Objective: 2 11. Vertical integration is attractive when (p. 160) 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. Dess - Chapter 06 #11 Learning Objective: 2 12. _______ is when a firm tries to find and acquire either poorly performing firms with unrealized (p. 161)potential or firms in industries on the threshold of significant, positive change. A. Parenting B. Restructuring C. Leveraging core competencies D. Sharing activities Dess - Chapter 06 #12 Learning Objective: 3 13. According to the text, Canfor Corporation of Vancouver is a good example from the forest (p. 158)industry of having followed a successful strategy, to expand across markets, of A. capital restructuring, and technology restructuring. B. asset restructuring. C. horizontal integration. D. vertical integration. Dess - Chapter 06 #13 Learning Objective: 2 14. Portfolio management matrices are applied to what level of strategy? (p. 163- 164) A. departmental level B. business level C. corporate level D. international level Dess - Chapter 06 #14 Learning Objective: 3 15. When using a BCG matrix, a business that currently holds a large market share in a rapidly (p. 164) growing market and that has minimal or negative cash flow would be known as a A. cow. B. dog. C. problem child. D. star. DLearning Objective: 3 16. In the BCG (Boston Consulting Group) Matrix, a business that has a low market share in an (p. 164) industry characterized by high market growth is termed a A. star. B. question mark. C. cash cow. D. dog. Dess - Chapter 06 #16 Learning Objective: 3 17. Portfolio management frameworks (e.g., BCG matrix) share which of the following (p. 164)characteristics? 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. Dess - Chapter 06 #17 Learning Objective: 3 18. Molson of Montreal and Coors of Colorado merged their operations in order to stand up to (p. 168) A. continued diversification in the beverage market. B. competition from Japan. C. continuing consolidation in the global beer industry. D. substantial cash outlays to maintain market share. Dess - Chapter 06 #18 Learning Objective: 4 19. The downsides or limitations of mergers and acquisitions include all of the following except: (p. 167- 168) A. expensive premiums that are frequently paid to acquire a business. B. difficulties in integrating the activities and resources of the acquired firm into a corporation's on-going operations. C. it is a slow means to enter new markets and acquire skills and competences. D. there can be many cultural issues that can doom an otherwise promising acquisition. Dess - Chapter 06 #19 Learning Objective: 4 20. Cooperative relationships such as _______ have potential advantages such as entering new (p. 169- 171) markets, reducing manufacturing (or other) costs in the value chain, and developing and diffusing new technologies. A. joint ventures B. mergers and acquisitions
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