Deck 7: Strategy Formulation: Corporate Strategy

Question 1

In many cases,________ integration is more profitable than ________ integration.

A) forward; backward
B) vertical; backward
C) backward; vertical
D) backward; forward
E) mass; forward

Answer 1

D

Question 2

Which one of the following directional strategies is most frequently used in corporations?

A) stability
B) consolidation
C) growth
D) retrenchment
E) expansion

Answer 2

C

Question 3

Which kind of corporate strategy deals with the firm's overall orientation toward growth?

A) portfolio strategy
B) directional strategy
C) parenting strategy
D) cooperative strategy
E) functional strategy

Answer 3

B

Question 4

Vertical integration is going backward on an industry's value chain.

Question 5

Corporate parenting is the coordination of cash flow among units.

Question 6

Which kind of corporate strategy deals with the manner in which the firm coordinates activities and builds corporate synergies through resource sharing and development?

A) portfolio strategy
B) directional strategy
C) parenting strategy
D) cooperative strategy
E) functional strategy

Question 7

An attempt to explain that vertical integration is more efficient than contracting for goods and services in the marketplace when the transaction costs of buying goods on the open market becomes too great has been proposed by

A) population theory.
B) institution theory.
C) freakonomics.
D) transaction cost economics.
E) transaction growth theory.

Question 8

What are the three key issues that corporate strategy addresses?

Question 9

Which of the following strategies was being used when Allied Corporation and Signal Companies formed Allied Signal?

A) merger
B) strategic alliance
C) diversification
D) acquisition
E) concentration

Question 10

The purpose of vertical growth is to

A) take over a function previously supplied by a former employer.
B) take over a function previously provided by a supplier or by a distributor.
C) acquire a company of similar objective.
D) sell a company encumbered with debt.
E) expand to countries with strong trade alliances.

Question 11

A disadvantage of vertical integration is that it

A) creates exit barriers.
B) improves coordination of activities.
C) decreases demand for the firm's products and services.
D) creates entry barriers.
E) avoids time consuming tasks.

Question 12

Corporate strategy deals primarily with the choice of direction for the firm as a whole and the management of its business or product portfolio.

Question 13

Which of the following is not a reason why the growth strategy is so desirable?

A) There are more opportunities for advancement and promotion.
B) A corporation that experiences successful growth is thought of positively by the marketplace and potential investors.
C) A large and growth-oriented corporation has more clout and influence.
D) A growing firm can cover up mistakes and inefficiencies because of the increase in cash flow revenue.
E) A large and growing firm attracts more acquisition offers.

Question 14

The most logical growth strategy for a corporation with current product lines with real growth potential in a growing industry is

A) concentration.
B) conglomerate integration.
C) concentric diversification.
D) stability.
E) retrenchment.

Question 15

Which strategy specifies the firm's overall direction in terms of its general orientation toward growth,the industries or markets in which it competes,and the manner in which it coordinates activities and transfers resources among business units?

A) corporate
B) functional
C) divisional
D) organizational
E) business

Question 16

Which external growth strategy was demonstrated when Procter & Gamble completely absorbed Gillette?

A) merger
B) strategic alliance
C) diversification
D) concentration
E) acquisition

Question 17

Which external growth strategy involves two or more corporations joining in a stock exchange and from which only one corporation survives?

A) merger
B) strategic alliance
C) diversification
D) acquisition
E) concentration

Question 18

Ford Motor Company's use of company resources to build its River Rouge Plant outside of Detroit so that iron ore could enter into one end of the plant and a finished automobile could exit out of the other end is called

A) vertical growth.
B) tapered integration.
C) horizontal integration.
D) external vertical integration.
E) quasi-integration.

Question 19

The purchase of the supplier Carroll's Foods for its hog-growing facilities by Smithfield Foods,the world's largest pork processor,is an example of

A) forward integration.
B) horizontal integration.
C) backward integration.
D) transferred integration.
E) mass integration.

Question 20

The ability for Nike to manufacture its own shoes and then build stores for distribution is an example of

A) forward integration.
B) horizontal integration.
C) backward integration.
D) transferred integration.
E) mass integration.

Question 21

When a firm internally makes 100% of its key supplies and completely controls its distributors,this is known as

A) full integration.
B) taper integration.
C) mass integration.
D) economical integration.
E) strategic integration.

Question 22

Research comparing concentric with conglomerate diversification concludes that

A) conglomerate diversification is always less profitable than concentric diversification.
B) concentric diversification is always less profitable than conglomerate diversification.
C) the relationship between relatedness and performance follows an inverted U-shaped curve.
D) neither concentric nor conglomerate diversification are ever profitable.
E) for optimum effectiveness both conglomerate and concentric diversification should be utilized in tandem.

Question 23

Which strategy is considered a timeout?

A) pause/proceed-with-caution
B) concentration
C) contraction
D) rebirth
E) captive company

Question 24

Growth through diversification out of an industry into an unrelated industry is called

A) concentration.
B) horizontal growth.
C) concentric diversification.
D) vertical growth.
E) conglomerate diversification.

Question 25

The stability strategy is appropriate for all of the following circumstances EXCEPT

A) useful in the short-run but can be dangerous if followed too long.
B) most appropriate for reasonably successful corporations in a reasonably predictable environment.
C) when a firm is continuing its current activities without a significant change in direction.
D) appropriate when the industry is in decline.
E) popular with small business owners who have found a niche and are happy with their success.

Question 26

In which phase of a turnaround strategy does the firm attempt to "stop the bleeding" with a general,across-the-board cutback in size and costs?

A) contraction
B) consolidation
C) captive company
D) rebirth
E) divestment

Question 27

Studies reveal that over one-half to two-thirds of acquisitions are failures primarily because

A) the premiums paid were too high for the firm to earn their cost of capital.
B) due diligence was not conducted.
C) the premiums were too high to finance and resulted in bankruptcy.
D) there were unresolved management conflicts.
E) there was a clash of management philosophies.

Question 28

________ seeks to perpetuate a firm while ________ terminates the firm.

A) Bankruptcy; liquidation
B) Captive company; bankruptcy
C) Bankruptcy; contraction
D) Rebirth; bankruptcy
E) Liquidation; sell off

Question 29

Which family of corporate strategies is often viewed as a lack of strategy?

A) stability strategies
B) cooperative strategies
C) growth strategies
D) retrenchment strategies
E) competitive strategies

Question 30

Adding a related or complementary product to a corporation's business units is called

A) concentration.
B) horizontal growth.
C) concentric diversification.
D) vertical growth.
E) conglomerate diversification.

Question 31

Which strategy is an attempt to artificially support profits when a company's sales are declining by reducing investment and short-term discretionary expenditures?

A) profit strategy
B) no-change strategy
C) turnaround strategy
D) concentration strategy
E) captive company strategy

Question 32

When Coca Cola contracted with Capgemini to provide accounting and financial services,which strategy was Coca Cola using?

A) horizontal growth
B) backward integration
C) outsourcing
D) retrenchment
E) diversification

Question 33

The controversy surrounding external versus internal growth finds

A) external growth appears to be superior financially to internal growth.
B) internal growth appears to be superior financially to external growth.
C) there appears to be no financial advantage to either.
D) acquisitions have a lower survival rate than new internally generated business ventures.
E) strategic alliances are superior to both.

Question 34

A firm's expansion into other geographic locations and/or increasing the range of products and services offered to current markets is called

A) forward vertical growth.
B) diversification.
C) backward vertical growth.
D) captive company strategy.
E) horizontal growth.

Question 35

With conglomerate diversification,the focus is on

A) product-market synergy.
B) sound investment and value-oriented management.
C) employee satisfaction.
D) similar product offerings.
E) market demand.

Question 36

Which strategy might be the most likely when management realizes that the current industry is unattractive and that the firm lacks outstanding skills that it could easily transfer to related products or services in other industries?

A) concentration
B) horizontal growth
C) concentric diversification
D) vertical growth
E) conglomerate diversification

Question 37

Which strategy did Delta choose when it acquired Northwest Airlines to obtain access to Northwest's Asian markets?

A) a retrenchment strategy using horizontal integration through internal means
B) a horizontal integration strategy
C) a stability strategy using concentric diversification
D) a growth strategy using vertical integration through external means
E) a retrenchment strategy using a concentration method

Question 38

When Bristol-Myers Squibb purchased 17% of ImClone's common stock to gain access to a new drug,it was using which type of integration?

A) full integration
B) long-term contracts
C) backwards integration
D) taper integration
E) quasi integration

Question 39

An international study by Bain & Company concluded that the likelihood of a successful acquisition is increased with

A) previous experience between an acquirer and a target firm.
B) narrowing the number of candidates for acquisition.
C) foregoing the time for due diligence.
D) limited geographical expansion.
E) the addition of capacity levels.

Question 40

When P&G sold off half of its brands and consolidated others,it was following which retrenchment strategy?

A) divestment
B) sell-out
C) contraction
D) captive company
E) liquidation

Question 41

In which strategy does management hope that another company will have the necessary resources and determination to return the company to profitability?

A) sell out
B) captive company
C) liquidation
D) bankruptcy
E) profit

Question 42

Which strategy is most appropriate as a temporary strategy to enable a corporation to consolidate its resources after prolonged rapid growth in an industry now facing an uncertain future?

A) horizontal integration strategy
B) no change strategy
C) retrenchment strategy
D) pause/proceed with caution strategy
E) profit strategy

Question 43

Backward integration is going backward on an industry's value chain.

Question 44

A merger is a transaction involving two or more corporations in which stock is exchanged,but from which only one corporation survives.

Question 45

With taper integration,a firm internally makes 100% of its key supplies and completely controls its distributors.

Question 46

Which one of the following is characteristic of a firm that has chosen a captive company strategy?

A) It is most appropriate for a company with a strong competitive position in a growing industry.
B) The firm increases the scope of its functional activities.
C) The firm gains a certainty of sales and production in return for becoming heavily dependent upon another firm for at least 75% of its sales.
D) The captive company acts as an angel to another firm.
E) It is the first phase for the company to execute a turnaround strategy.

Question 47

BP and Royal Dutch Shell are examples of fully integrated firms because they internally make 100% of their key supplies and completely control their distributors.

Question 48

Vertical integration is the degree to which a firm operates vertically in multiple locations on an industry's value chain from extracting raw materials to manufacturing to retailing.

Question 49

The strategy which takes place in three basic phases of contraction,consolidation,and rebirth is

A) merger.
B) liquidation.
C) integration.
D) divestment.
E) turnaround.

Question 50

Which strategy is most appropriate for a company in an industry in which the future is expected to continue as an extension of the present?

A) horizontal integration strategy
B) no change strategy
C) retrenchment strategy
D) pause/proceed with caution strategy
E) profit strategy

Question 51

Which strategy involves giving up management of the firm to the courts in return for some settlement of the corporation's obligations?

A) liquidation
B) bankruptcy
C) diversification
D) divestment
E) consolidation

Question 52

Which of the following describes a turnaround strategy?

A) a form of divestment and is appropriate when corporate problems can be traced to the poor performance of an SBU or product line
B) occurs when the corporation reduces the scope of some of its functional activities and becomes "captive" to another firm
C) emphasizes improving operational efficiency and is appropriate when a corporation's problems are pervasive, but not yet critical
D) occurs when a corporation liquidates all its assets
E) involves adding different products or divisions to the corporation

Question 53

Horizontal growth can be achieved by expanding the firm's products into other geographic locations and/or by increasing the range of products and services offered to current markets.

Question 54

The most widely pursued corporate directional strategies are those designed to achieve growth.

Question 55

Which strategy did Circuit City use in 2008 when it converted its retail stores to cash?

A) liquidation
B) bankruptcy
C) diversification
D) divestment
E) consolidation

Question 56

A long-term contract is considered vertical integration.

Question 57

The two basic growth strategies are concentration and strategic alliances.

Question 58

Backward integration is often more profitable than forward integration.

Question 59

Which one of the following is not a characteristic of a firm that has chosen a captive company strategy?

A) It is most appropriate for a company with a strong competitive position in a growing industry.
B) The firm reduces its functional activities to reduce costs.
C) The firm gains a certainty of sales and production in return for becoming heavily dependent upon another firm for at least 75% of its sales.
D) One of its customers makes up a large percentage of the company's sales and wants the company to keep operating as its supplier.
E) Management desperately seeks an "angel" to guarantee the company's continued existence.

Question 60

An example of forward quasi-integration would be a large pharmaceutical firm that acquires part interest in a drugstore chain in order to guarantee that its drugs have access to the distribution channel.

Question 61

If a new business is very similar to that of the acquiring firm,it adds little new to the corporation and only marginally improves performance.

Question 62

Discuss the more popular stability strategies.

Question 63

Discuss the differences among full integration,taper integration,and quasi-integration.

Question 64

Horizontal growth is achieved through internal development and not external means.

Question 65

Why is growth a very attractive strategy?

Question 66

Conglomerate diversification is diversifying into an industry unrelated to its current one.

Question 67

Some companies have moved away from vertical growth strategies toward cooperative contractual relationships with suppliers and even with competitors.

Question 68

Define a retrenchment strategy.Discuss the more popular options.

Question 69

One of the most popular aids to developing corporate strategy in multi-business corporations that views business units in terms of the cash they generate is called

A) PIMS.
B) segmentation analysis.
C) portfolio analysis.
D) industry analysis.
E) diversification study.

Question 70

Companies following a related diversification strategy appear to be higher performers and survive longer than companies with narrower scope following a pure concentration strategy.

Question 71

Strategic managers who adopt a conglomerate diversification strategy are primarily concerned with financial considerations of cash flow or risk reduction.

Question 72

The probability of succeeding by moving into a related business is a function of a company's position in its core business.

Question 73

Discuss the two basic growth strategies.

Question 74

Vertical integration is always more efficient than the marketplace.

Question 75

Stability strategies can be very useful in the short run,but they can be dangerous if followed for too long.

Question 76

Concentric diversification is growth into unrelated businesses but may be a very appropriate corporate strategy when a firm has a strong competitive position but industry attractiveness is low.

Question 77

When Sony's CEO,Howard Stringer,eliminated 10,000 jobs and closed 11 plants,he was addressing the contraction phase of the turnaround strategy.

Question 78

In the Boston Consulting Group's Growth-Share Matrix,the relative competitive position of a product or division is defined as

A) its market share.
B) its gross sales divided by its market share.
C) its market share multiplied by that of its nearest competitor.
D) its market share divided by that of the smallest other competitor.
E) its market share divided by that of the largest other competitor.

Question 79

Discuss the three general orientations comprising directional strategy.

Question 80

The stability strategies are really a lack of any strategy.