Question 1

When using the BCG matrix, a business that currently holds a large market share in a rapidly growing market and that has minimal or negative cash flow is described as a:
A) cow.
B) dog.
C) problem child.
D) star.

Accepted Answer

A "star" in the BCG matrix is a business unit with a high market share in a fast-growing industry, often requiring significant investment to maintain or grow its position, which can result in minimal or negative cash flow.

Question 2

_______ 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

Accepted Answer

Restructuring involves a company identifying underperforming firms or those in industries about to experience significant growth or change, with the intent to improve their performance and capitalize on upcoming opportunities.

Question 3

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.

Accepted Answer

Vertical integration can lead to unbalanced capacities across the supply chain, difficulties in combining specializations from different stages of production, and reduced flexibility due to the increased scale and scope of operations.

Question 4

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.

Accepted Answer

When Rogers acquired Microcell, the clients of Fido, which was Microcell's brand name, benefited from broader market coverage and improved reception due to Rogers' larger network infrastructure. This acquisition allowed Fido customers to access Rogers' more extensive network, leading to better service coverage and reception quality.

Question 5

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.

Accepted Answer

Vertical integration is attractive when transaction costs (the costs associated with each transaction such as finding a supplier, negotiating contracts, and ensuring contract compliance) are higher than internal administrative costs (the costs associated with managing transactions within the firm). This is because, in such cases, it becomes more cost-effective for a company to perform the activities internally rather than engaging with external entities.

Question 6

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.

Accepted Answer

The new business having an established large market share is not a requirement for a core competence to be a viable basis for strengthening a new business unit. The other three options (A, B, and C) are valid requirements for a core competence to contribute to the success of a new business unit.

Question 7

Molson, Inc. of Montreal and Adolph Coors Co. of Golden, Colorado merged their operations in order to stand up to the
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.

Accepted Answer

The merger between Molson, Inc. and Adolph Coors Co. was primarily aimed at addressing the continuing consolidation in the global beer industry, allowing them to become more competitive on a larger scale.

Question 8

Which two related issues are addressed with a corporate-level strategy?
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.

Accepted Answer

Corporate-level strategy focuses on the overall scope and direction of a corporation, determining what businesses to compete in and how these businesses can achieve synergy to create more value together than they could separately.

Question 9

Transaction costs include all of the following costs, except
A) search costs.
B) negotiating costs.
C) monitoring costs.
D) agency costs.

Accepted Answer

Agency costs are not considered a part of transaction costs. Transaction costs refer to the costs associated with making an economic exchange, including search, negotiating, and monitoring costs. Agency costs, however, relate to the costs arising from conflicts of interest between principals (such as shareholders) and agents (such as company executives), which is a separate concept.

Question 10

It may be advantageous to vertically integrate when
A) lower transaction costs and improved coordination are vital and achievable.
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.

Accepted Answer

Vertical integration can be advantageous when it leads to lower transaction costs and improved coordination between different stages of production or service delivery, as it allows for more streamlined operations and potentially higher efficiencies.

Question 11

In the BCG (Boston Consulting Group) matrix, a business that has a weak market share in an industry characterized by high market growth is called a:
A) star.
B) question mark.
C) cash cow.
D) dog.

Accepted Answer

A business with a weak market share in a high-growth industry is termed a "question mark" in the BCG matrix. This is because it has potential for growth but requires significant investment to increase its market share.

Question 12

When using the BCG matrix, a SBU with weak market shares in low-growth industries is described as a
A) cow.
B) dog.
C) Monkey.
D) star.

Accepted Answer

In the BCG matrix, an SBU (Strategic Business Unit) with weak market shares in low-growth industries is described as a "dog." Dogs are considered to not generate much cash for the company and might even require more cash to maintain than they generate.

Question 13

__________ 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

Accepted Answer

Core competencies reflect the collective learning in organizations, including how to coordinate production skills, integrate multiple streams of technologies, and market and merchandise diverse products and services. They represent the organization's collective knowledge about how to perform various processes and activities.

Question 14

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.

Accepted Answer

Sharing activities refers to the strategy where management utilizes common resources, such as production facilities or purchasing procedures, to support different but related products, aiming to achieve efficiencies and synergies.

Question 15

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.

Accepted Answer

Vertical integration can be a strategic move for a firm when its suppliers are unreliable or unable to maintain quality standards, as it allows the firm to take control over its supply chain and ensure the quality of inputs.

Question 16

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.

Accepted Answer

The answer of According to the text, Canfor Corporation of...

Question 17

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.

Accepted Answer

Sharing core competencies is most effective when the similarity is in the value chain, not in the product. This means that the company can leverage its existing skills and knowledge to create new products or enter new markets. Products using similar distribution channels, having the same target market, or using the same production methods may also provide some advantages, but they are not as crucial as similarities in the value chain.

Question 18

The word synergy means:
A) Creating value
B) Working together
C) Increasing competition
D) Deregulating industries

Accepted Answer

Synergy refers to the concept of two or more entities working together to produce a combined effect greater than the sum of their separate effects.

Question 19

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.

Accepted Answer

Grid dimensions are based on external environments and internal capabilities/market positions.

Question 20

Portfolio management matrices are applied to what level of strategy?
A) departmental level
B) business level
C) corporate level
D) international level

Accepted Answer

Portfolio management matrices are applied at the corporate level as it involves managing a portfolio of businesses and assets owned by a corporation. This includes deciding which businesses to invest in, which to divest, and how to allocate resources among them. Departmental and business levels deal with more specific and operational strategies, while international level strategy focuses more on the organization's global expansion and operations.

Quiz 6: Corporate-Level Strategy: Creating Value Through Diversification

When using the BCG matrix, a business that currently holds a large market share in a rapidly growing market and that has minimal or negative cash flow is described as a:

_______ 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.

Unbalanced capacities that limit cost savings, difficulties in combining specializations, and reduced flexibility are disadvantages associated with

When Rogers acquired Microcell, the clients of Fido, Microcell's brand name

Vertical integration is attractive when

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?

Molson, Inc. of Montreal and Adolph Coors Co. of Golden, Colorado merged their operations in order to stand up to the

Which two related issues are addressed with a corporate-level strategy?

Transaction costs include all of the following costs, except

It may be advantageous to vertically integrate when

In the BCG (Boston Consulting Group) matrix, a business that has a weak market share in an industry characterized by high market growth is called a:

When using the BCG matrix, a SBU with weak market shares in low-growth industries is described as a

__________ 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.

When management uses common production facilities or purchasing procedures to distribute different but related products, they are

A firm should consider vertical integration when

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

Sharing core competencies is one of the primary potential advantages of diversification. In order for diversification to be most successful, it is important that

The word synergy means:

Portfolio management frameworks (e.g., BCG matrix) share which of the following characteristics?

Portfolio management matrices are applied to what level of strategy?