Deck 8: Corporate Strategy: Adding Value in Multi-Business Firms

Question 1

Empirical research has found that multibusiness firms with related businesses are more successful than conglomerates.

Answer 1

False

Question 2

What are the key concerns for managers making corporate strategy decisions?

Answer 2

What is the corporate rationale? In other words, why does the corporation own that particular mix of businesses?
How does the corporation grow?
Are there any synergies between the businesses, and if so, how are they managed?
How does the corporate level justify its existence?
How should the corporation be structured?

Question 3

Explain what is meant by the term 'synergy' in relation to corporate strategy.

Answer 3

Synergy can be expressed by the sum 2+2=5
In corporate terms, it means that more value can be created for the corporation as a whole if one or more activity (or competence) is shared across one or more businesses

Question 4

What is the theoretical assumption behind the Boston Consulting Group Matrix?

Question 5

In what ways can a corporate parent potentially add value to its individual businesses?

Question 6

What are the benefits of a conglomerate strategy?

Question 7

The 1990s saw a surge in acquisition activity. This was primarily because

A) The conglomerate strategy was proven to be the most profitable strategy
B) The pressures of global competition increased
C) The pressure to be locally responsive increased
D) Acquisition targets were cheap

Question 8

It is in the pre-acquisition stage that most of the value of an acquisition is destroyed.

Question 9

A strategic alliance involving an automobile manufacturer partnering with a components supplier is an example of

A) downstream vertical integration
B) horizontal integration
C) a quasi-concentration alliance
D) upstream vertical integration

Question 10

A major drawback of strategic alliances is that the leakage of knowledge outweighs the benefits gained from the alliance.

Question 11

A relatively quick method of corporate growth that is not as problematic in terms of integration is through

A) a strategic alliance
B) a merger
C) an acquisition
D) organic growth

Question 12

Strategic alliances would not involve two competitors

Question 13

Prahalad et al's (1987) article entitled 'Collaborate with your competitors - and win' is referring to

A) the paradoxical nature of strategic alliances
B) strong corporate cultures
C) organizational culture clashes between merging organizations
D) the psychology of the transnational organization

Question 14

The post-acquisition phase of a conglomerate acquisition is less risky and complex than an acquisition where synergy is present.

Question 15

The growth-share matrix of the Boston Consulting Group is based on which theory?

A) the resource based view
B) the experience curve
C) the product life cycle
D) the industry life cycle

Question 16

A conglomerate firm is a multibusiness firm using which type of growth strategy

A) Unrelated diversification
B) Related diversification
C) vertical integration
D) Synergy management

Question 17

Private equity firms are the new synergy managers.

Question 18

Which of the following corporate styles is likely to have centralized functions and systems?

A) A private equity firm
B) Unrelated diversification
C) A conglomerate
D) Synergy manager

Question 19

For a multi-business firm, growth is best achieved through unrelated diversification because it is less risky.

Question 20

Three general styles of interface between the corporate level and the business level have been observed. The 'strategic planning' style of corporate organization is one where

A) Corporate level executives allocate resources to business units
B) Corporate level executives have some influence over business unit strategy
C) Corporate level executives define and monitor the strategy of business units
D) Corporate level executives set financial targets for business units

Question 21

A viable corporate strategy is to buy up a failing conglomerate and sell off the individual parts at a profit.

Question 22

Goold et al (1994) have studied the potential added value that the corporate level can give to the business level in a multi-business firm. What term do they use to describe this added value

A) Transaction cost value
B) Transaction cost advantage
C) Parenting value
D) Parenting advantage

Question 23

One of the key questions that a multibusiness firm needs to consider is the degree of relatedness between businesses in the firm. Ideally, the value that is generated should be more than the sum of the businesses - this is known as

A) diversification
B) synergy
C) optimization
D) satisficing

Question 24

The theory of Transaction Cost Economics suggests that the multibusiness firm benefits in two major ways over standalone businesses. These can be categorized as scope advantages and

A) Knowledge advantages
B) Scale advantages
C) Cost advantages
D) Governance advantages

Question 25

In the language of the resource based view (RBV), the scope advantages that multibusinesses firms can theoretically benefit from can be described as

A) core competencies
B) core rigidities
C) path dependency
D) causal ambiguity

Question 26

Strategy in a multi-business firm is commonly known as

A) parenting strategy
B) conglomerate strategy
C) corporate strategy
D) portfolio strategy

Question 27

Which of the following are primary concerns of corporate strategy?

A) What type of businesses should make up the portfolio
B) How should the firm achieve profitable growth
C) How should the business achieve competitive advantage in its market
D) How related should the businesses within the firm be

Question 28

The traditional 'U-form' organizational structure is organized around

A) Geographical areas
B) Product lines
C) Business functions
D) A combination of product line and geographical area

Question 29

Which of the following writers studied the link between strategy and structure in the 1960s?

A) Milton Friedman
B) Abraham Maslow
C) Henry Mintzberg
D) Alfred Chandler

Question 30

Which of the following is NOT an advantage of the M-form organizational structure?

A) It allows executives to concentrate on a specific business function
B) It enables executives to manage the strategy of an individual business unit
C) It frees executives from the day to day operations of a business unit
D) It allows the corporate level to see more clearly which business units are succeeding or failing