Deck 8: Selecting Corporate-Level Strategies

Question 1

Entering new geographic areas is one way of pursuing market penetration.

Answer 1

False

Question 2

A backward vertical integration strategy involves a firm entering a buyer's business.

Answer 2

False

Question 3

Vertical diversification occurs when a firm moves into a new industry that has important similarities with the firm's existing industry or industries.

Answer 3

False

Question 4

A forward vertical integration strategy involves a firm entering a supplier's business.

Question 5

Some firms use a backward vertical integration strategy when executives are concerned that a supplier has too much power over their firms.

Question 6

Most unrelated diversification efforts are not successful.

Question 7

When pursuing a vertical integration strategy, a firm gets involved in new portions of the value chain.

Question 8

Entering a new retail chain is one way of achieving market penetration.

Question 9

Horizontal integration strategies can take a firm into very different businesses.

Question 10

Market penetration involves trying to gain additional share of a firm's existing markets using existing products.

Question 11

Firms using diversification strategies are those that enter entirely new industries.

Question 12

Product penetration involves creating new products to serve existing markets.

Question 13

Market development involves taking existing products and trying to sell them within new markets.

Question 14

Firms following a retrenchment strategy shrink one or more of their business units.

Question 15

Horizontal diversification occurs when a firm enters an industry that lacks any important similarities with the firm's existing industry or industries.

Question 16

Diversification requires a firm to move into new value chains.

Question 17

Divestment refers to selling off part of a firm's operations.

Question 18

Firms often rely on advertising to implement the concentration strategy of market penetration.

Question 19

Forward vertical integration strategy can be useful for neutralizing the effect of powerful buyers.

Question 20

Many firms accomplish diversification through vertical integration strategies.

Question 21

The relatively poor performance of diversified firms is known as the diversification discount.

Question 22

Which of the following is true about market penetration?

A) It involves trying to gain additional share of a firm's existing markets using existing products.
B) It involves creating new products to serve existing markets.
C) It involves creating new products and trying to sell them within new markets.
D) It involves entering entirely new industries.
E) It involves moving into a new industry that has important similarities with the firm's existing industries.

Question 23

Market development differs from market penetration in that market development:

A) involves trying to sell existing products within new markets.
B) involves gaining additional share of existing markets using existing products.
C) involves creating new products to serve existing markets.
D) involves the joining of two similarly-sized companies into one company.
E) involves entering a new value chain.

Question 24

Portfolio planning is a process that helps executives assess their firm's prospects for success within each of its industries, offers suggestions about what to do within each industry, and provides ideas for how to allocate resources across the industries.

Question 25

Porter's five forces analysis is the best-known approach to portfolio planning.

Question 26

Liquidation involves simply shutting down portions of a firm's operations, often at a tremendous financial loss.

Question 27

Which of the following concentration strategies involves entering a new retail chain to sell an existing product?

A) Vertical integration
B) Related diversification
C) Product development
D) Market penetration
E) Market development

Question 28

Which of the following concentration strategies involves selling existing products in new geographic areas?

A) Vertical integration
B) Related diversification
C) Product development
D) Market penetration
E) Market development

Question 29

Using the BCG matrix requires a firm's businesses to be categorized as high or low along two dimensions: its share of the market and the growth rate of its industry.

Question 30

Market development involves:

A) creating new products to serve existing markets.
B) creating new products and trying to sell them within new markets.
C) integrating existing products to serve existing markets better.
D) taking existing products and trying to sell them within new markets.
E) trying to gain additional share of a firm's existing markets using existing products.

Question 31

According to the BCG matrix, executives must decide whether to build cash cows into stars or divest them.

Question 32

The BCG matrix analysis suggests that cash cows have bright prospects and thus are good candidates for growth.

Question 33

Moreau Musical Instruments Inc, a company that manufactures stringed instruments and amplifiers, features famous musicians in print and television ads to increase the sale of their products. The firm aims to gain greater market share within the musical instrument manufacturing industry. Which of the following concentration strategies is this an example of?

A) Spin-off
B) Related diversification
C) Product development
D) Market penetration
E) Market development

Question 34

_____ involves trying to gain additional share of a firm's existing markets using existing products.

A) Spin-off
B) Related diversification
C) Product development
D) Market penetration
E) Market development

Question 35

Companies use concentration strategies to grow within an industry. A company can use one, two, or all three as part of its effort to excel within an industry. Which of the following are concentration strategies?

A) Market Penetration
B) Market Development
C) Product Development
D) A & B
E) A, B, & C

Question 36

The BCG matrix analysis suggests that profits from cash cows should be invested back into cash cows.

Question 37

Comfort Shoes Inc. is a firm that manufactures orthopedic shoes and sells them at retail stores in New York. Based on the popularity of the shoes, the firm decides to open an outlet in New Jersey to sell the existing line of orthopedic shoes. In this example, Comfort Shoes Inc. uses which of the following strategies?

A) Market penetration
B) Product development
C) Related diversification
D) Market development
E) Vertical integration

Question 38

Sheets Brand Energy Strips experimented with a strategy in 2011. The firm made a deal with the Atlanta branch of Budget Rent a Car to wrap rental cars with an ad. The benefit to customers was that driving one of these mobile billboards saved a lot of money. A renter who would have paid $300 for a four-day rental only needed to pay $88 to rent a car featuring the wrap. Sheets benefitted because the cars spread their brand everywhere the renter travelled. Sheets used which of the following strategies?

A) Market penetration
B) Product development
C) Related diversification
D) Horizontal integration
E) Vertical integration

Question 39

Executives sometime use diversification strategies to overcome the divestment discount.

Question 40

Diversification involves creating a new company whose stock is owned by investors.

Question 41

A(n) _____ strategy involves a firm entering a buyer's business.

A) market penetration
B) unrelated diversification
C) horizontal integration
D) market development
E) forward vertical integration

Question 42

Which of the following strategies involves a firm entering an industry that lacks any important similarities with the firm's existing industry or industries?

A) Forward vertical integration
B) Unrelated diversification
C) Horizontal integration
D) Decentralization
E) Backward vertical integration

Question 43

_____ involves creating new products to serve existing markets.

A) Vertical integration
B) Related diversification
C) Product development
D) Market penetration
E) Market development

Question 44

Alpha Computers, a firm that assembles and sells desktop computers, decides to manufacture computer parts such as mother boards and monitors. In this example, Alpha Computers uses which of the following strategies?

A) Backward vertical integration
B) Unrelated diversification
C) Product development
D) Market penetration
E) Related diversification

Question 45

Which of the following best describes the strategy of backward vertical integration?

A) It involves a firm entering a supplier's business.
B) It requires a firm to gain greater market share through advertising.
C) It involves a firm entering a buyer's business.
D) It requires a firm to sell its existing products in new markets.
E) It involves a firm entering entirely new industries.

Question 46

Each year Jones Soda Co. introduces new holiday-themed unusual flavors such as Candy Cane, Gingerbread, Pear Tree, and Egg Nog. This is an example of which of the following strategies?

A) Vertical integration
B) Horizontal integration
C) Product development
D) Market penetration
E) Market development

Question 47

Delta Airlines announced that it was purchasing an oil refinery for $150 million and that it would spend an additional $100 million to upgrade the facility. Jet fuel is a major expense for airlines and Delta hoped that this would allow it to control costs. In this example, Delta is using which of the following strategies?

A) Unrelated diversification
B) Product development
C) Market penetration
D) Backward vertical integration
E) Related diversification

Question 48

Which of the following strategies can be very attractive when a firm's suppliers or buyers have too much power over the firm and are becoming increasingly profitable at the firm's expense?

A) Unrelated diversification
B) Vertical integration
C) Forward horizontal integration
D) Market penetration
E) Backward horizontal integration

Question 49

Which of the following is true about acquisitions?

A) It typically occurs when a larger company purchases a smaller one.
B) It typically involves creating new products to serve existing markets.
C) It typically involves the joining of two similarly sized companies into one.
D) It typically requires a firm to enter a buyer's business.
E) It typically involves a firm entering a supplier's business.

Question 50

Disney has pursued _____________ by operating more than three hundred retail stores that sell merchandise based on Disney's characters and movies. This allows Disney to capture profits that would otherwise be enjoyed by another store.

A) market penetration
B) unrelated diversification
C) horizontal integration
D) decentralization
E) forward vertical integration

Question 51

Starbucks acquired competitor Seattle's Best Coffee - which had a presence in Subway restaurants - in order to target a more working-class audience without diluting the Starbucks brand. What is this an example of?

A) Vertical integration
B) Horizontal integration
C) Forward integration
D) Backward integration
E) Lateral acquisition

Question 52

When pursuing a(n) _____ strategy, a firm gets involved in new portions of the value chain.

A) unrelated diversification
B) vertical integration
C) horizontal integration
D) related diversification
E) market development

Question 53

Forward vertical integration involves:

A) entering a supplier's business.
B) moving into a new value chain.
C) launching new products in the existing market.
D) selling existing products in new markets.
E) entering a buyer's business.

Question 54

Smart Systems Inc. is a firm that manufactures and sells desktop computers to the consumer and business market segments. After extensive market research and portfolio planning, the firm decides to launch a new line of mobile phones. In this example, Digi-Smart Systems uses which of the following strategies?

A) Forward vertical integration
B) Related diversification
C) Market penetration
D) Market development
E) Backward vertical integration

Question 55

Which of the following best describes the strategy of diversification?

A) It requires a firm to enter a supplier's business.
B) It requires a firm to move into new value chains.
C) It requires a firm to enter a buyer's business.
D) It requires a firm to get involved in new portions of the value chain.
D) It requires a firm to sell its existing products in new markets.

Question 56

_____ can be useful for neutralizing the effect of powerful buyers.

A) Market penetration
B) Unrelated diversification
C) Horizontal integration
D) Decentralization
E) Forward vertical integration

Question 57

Starlight Inc., a women's apparel and fashion accessories manufacturing firm, launches a new line of maternity wear and children's clothing to be sold at its existing outlets. In this example, Starlight Inc. uses which of the following strategies?

A) Vertical integration
B) Horizontal integration
C) Product development
D) Market penetration
E) Market development

Question 58

As smoking becomes less and less attractive in many countries, lighter firm Zippo has faced a 50 percent decline in sales levels. They have begun to offer lanterns, hand warmers, outdoor tools, cooking accessories, fragrances, and watches in hopes of leveraging their "rugged, durable, made in America, iconic" image. Which of the following strategies are Zippo executives using?

A) Forward vertical integration
B) Market penetration
C) Related diversification
D) Market development
E) Backward vertical integration

Question 59

Firms using _____ strategies are those that enter entirely new industries.

A) concentration
B) retrenchment
C) diversification
D) market penetration
E) divestment

Question 60

Which of the following is true about mergers?

A) It typically occurs when a larger company purchases a smaller one.
B) It typically involves creating new products to serve existing markets.
C) It typically involves the joining of two similarly sized companies into one.
D) It typically requires a firm to enter a buyer's business.
E) It typically involves a firm entering a supplier's business.

Question 61

_____ is a process that helps executives assess their firms' prospects for success within each of its industries, offers suggestions about what to do within each industry, and provides ideas for how to allocate resources across the industries.

A) Resource-based evaluation
B) The VRIO framework
C) Disintermediation
D) Transaction cost analysis
E) Portfolio planning

Question 62

Divestment is often used as a means to counter the _____ discount.

A) retrenchment
B) spin-off
C) liquidation
D) retracement
E) diversification

Question 63

In a BCG matrix, _____ have bright prospects and thus are good candidates for growth.

A) dogs
B) stars
C) cash cows
D) question marks
E) turkeys

Question 64

Firms following a(n) _____ strategy shrink one or more of their business units.

A) blue ocean
B) diversification
C) integration
D) retrenchment
E) disintermediation

Question 65

_____ refers to selling off part of a firm's operations.

A) Divestment
B) Retrenchment
C) Diversification
D) Liquidation
E) Retracement

Question 66

Much like an army under attack, firms using the _____ strategy hope to make just a small retreat rather than losing a battle for survival.

A) blue ocean
B) diversification
C) integration
D) retrenchment
E) disintermediation

Question 67

Liquidation differs from divestment in that liquidation involves:

A) the joining of two similarly sized companies into one.
B) creating a new company whose stock is owned by investors.
C) moving into new value chains.
D) simply shutting down portions of a firm's operations.
E) selling off part of a firm's operations.

Question 68

Which of the following is true about business units categorized as cash cows in a BCG matrix?

A) They are low market share units within slow growing industries.
B) They are high market share units within slow growing industries.
C) They are high market share units within fast growing industries.
D) They are high market share units within service industries.
E) They are low market share units within fast growing industries.

Question 69

The Boston Consulting Group matrix refers to:

A) a concentration strategy that involves acquiring or merging with a rival.
B) an approach to diversification.
C) an approach to portfolio planning.
D) a strategy that firms use to successfully compete only within a single industry.
E) a strategy that requires a firm to get involved in new portions of the value chain.

Question 70

Which of the following is true about business units categorized as stars in a BCG matrix?

A) They are low market share units within slow growing industries.
B) They are high market share units within slow growing industries.
C) They are high market share units within fast growing industries.
D) They are low market share units within service industries.
E) They are low market share units within fast growing industries.

Question 71

Which of the following requires a firm's businesses to be categorized as high or low along two dimensions: its share of the market and the growth rate of its industry?

A) The BCG matrix
B) Blue Ocean strategy
C) The VRIO framework
D) SWOT analysis
E) Porter's analysis

Question 72

In the BCG matrix, profits from _____ should not be invested back into that category because the industries in it have bleak prospects.

A) dogs
B) stars
C) cash cows
D) question marks
E) turkeys

Question 73

Investors often struggle to understand the complexity of diversified companies, and this can result in relatively poor performance by the stocks of such companies. This is known as a ________.

A) divestment discount
B) diversification discount
C) spin-off strategy
D) liquidation opportunity
E) retracement opportunity

Question 74

Arc Technology Inc., an American software company, needed to cut costs to remain competitive. The firm laid off about 10 percent of its workforce in 2011 to ensure the viability of the business in future. In this example, Arc Technology Inc. uses which of the following strategies?

A) Divestment
B) Retrenchment
C) Spin-off
D) Liquidation
E) Retracement

Question 75

Units categorized as _____ in a BCG matrix are good candidates for divestment.

A) dogs
B) stars
C) cash cows
D) question marks
E) turkeys

Question 76

Marigold Manufacturers Inc. is a firm that produces and sells home appliances. Marigold Manufacturers Inc. acquires a women's apparel manufacturing firm and plans to manufacture and sell women's fashion apparel. This is an example of a(n) _____ strategy.

A) forward vertical integration
B) unrelated diversification
C) market penetration
D) decentralization
E) backward vertical integration

Question 77

Which of the following involves simply shutting down portions of a firm's operations, often at a tremendous financial loss?

A) Divestment
B) Retrenchment
C) Spin-off
D) Liquidation
E) Retracement

Question 78

In a BCG matrix, low market share units within slow growing industries are called _____.

A) dogs
B) stars
C) cash cows
D) question marks
E) turkeys

Question 79

Divestment differs from retrenchment in that divestment involves:

A) reducing the size of part of a firm's operations though laying off employees.
B) selling off part of a firm's operations.
C) creating a new company whose stock is owned by investors out of a piece of a bigger company.
D) shutting down portions of a firm's operations, often at a tremendous financial loss.
E) the joining of two similarly sized companies into one.

Question 80

Which of the following best describes a spin-off?

A) It involves creating a new company whose stock is owned by investors.
B) It refers to selling off part of a firm's operations.
C) It requires moving into new value chains.
D) It involves simply shutting down portions of a firm's operations.
E) It involves a firm acquiring a rival's business.