Question 1

While management's upfront involvement in the acquisition process is crucial, management should largely disengage from the process until the transaction is completed.

Accepted Answer

While management should not micromanage the acquisition process, they should remain involved and provide oversight throughout the process to ensure that it aligns with the company's strategic objectives and does not pose any significant risks. Once the transaction is completed, management should then fully engage in integrating the acquired company into the existing business.

Question 2

The market or markets in which a firm chooses to compete should reflect the fit between the firm's primary strengths and its ability to satisfy customers needs better than the competition.

Accepted Answer

This statement is true. The market or markets a firm competes in should align with the firm's strengths and its ability to provide superior customer satisfaction compared to its competitors. This helps the firm leverage its advantages to gain a competitive edge and succeed in the market.

Question 3

Planning in advance of a merger or an acquisition necessarily slows down decision making.

Accepted Answer

Planning in advance can actually streamline decision-making by identifying potential issues, aligning objectives, and establishing clear strategies, thereby facilitating a smoother integration process.

Question 4

The implementation strategy refers to the way in which a firm chooses to implement its business strategy.

Accepted Answer

The implementation strategy is a vital part of a firm's overall business strategy, as it outlines the specific actions and steps that the company will take to achieve its goals and objectives. This can involve a variety of different approaches, including organizational restructuring, investment in technology or infrastructure, changes to product or service offerings, and more. By carefully planning and executing their implementation strategy, firms can help ensure that their business strategy is effectively and efficiently executed, leading to greater success and profitability over time.

Question 5

Operating risk addresses the ability of the buyer to manage the acquired company.

Accepted Answer

Operating risk does address the ability of the buyer to manage the acquired company. It assesses the potential difficulties that may arise as a result of the buyer's lack of experience or expertise in running the business, as well as any factors that may impact the company's ability to continue operating successfully under new ownership.

Question 6

Good planning expedites sound decision making.

Accepted Answer

Good planning helps to reduce uncertainty and provide a clear path for decision making, thereby expediting the process of making sound decisions.

Question 7

Resource limitations in developing the acquisition plan include money, borrowing capacity, as well as management time and skills.

Accepted Answer

Resource limitations including financial constraints, borrowing capacity, and management time and skills must be considered when developing the acquisition plan.

Question 8

An acquisition is one of many options available for implementing a firm's business plan.

Accepted Answer

Acquisition is an option available for a firm to implement its business plan, but it is not the only option. Other options include internal growth, strategic partnerships, joint ventures, and diversification.

Question 9

A collection of markets is said to comprise an industry.

Accepted Answer

A collection of markets that produce similar goods or services and compete with each other is known as an industry.

Question 10

A cost leadership strategy is most appropriate when pursued concurrently by a number of firms in the same industry with approximately the same market share.

Accepted Answer

A cost leadership strategy is most effective when pursued by a single firm in an industry with lower market share, as it allows the firm to have a competitive advantage by offering lower prices than its competitors. If multiple firms pursued a cost leadership strategy in the same industry with approximately the same market share, it would lead to price wars and decreased profitability for all firms involved. In this scenario, a differentiation strategy may be more appropriate for firms to differentiate themselves and gain a competitive advantage.

Question 11

Market profiling entails collecting sufficient data to accurately assess and characterize a firm's competitive environment within its chosen markets.

Accepted Answer

Market profiling involves gathering data on competitors, customers, and market trends to gain insights into a company's competitive environment. This information is important in developing effective marketing strategies and staying ahead of the competition.

Question 12

Contingency plans are actions that are taken as an alternative to the firm's current business strategy.

Accepted Answer

Contingency plans are developed to provide alternative courses of action in case the current business strategy is not effective or unforeseen events occur. These plans help firms to be prepared for unexpected situations and reduce the negative impact of such situations on their operations.

Question 13

Financial risk refers to the buyer's willingness and ability to leverage a transaction as well as the willingness of shareholders to accept near-term earnings per share dilution.

Accepted Answer

Financial risk refers to the buyer's willingness and ability to leverage a transaction.

Question 14

Examples of management preferences used in an acquisition plan include their preference for an asset or stock purchase or openness to partial rather than full ownership of the target firm.

Accepted Answer

This statement is true. Management preferences for the type and extent of ownership are important considerations in an acquisition plan.

Question 15

Potential competitors include firms (both domestic and foreign) in the current market, those in related markets, current customers, and current suppliers.

Accepted Answer

Potential competitors can come from various sources, including those in the current market, related markets, current customers, and suppliers.

Question 16

The joint venture may represent an attractive alternative to a merger or acquisition.

Accepted Answer

A joint venture allows companies to collaborate and share resources while maintaining their independence and autonomy, making it a potentially more attractive option than a full merger or acquisition, which involves significant changes to company ownership and control.

Question 17

A corporate mission statement seeks to describe the corporation's purpose for being and where the corporation hopes to go.

Accepted Answer

A corporate mission statement is a statement that describes the overall purpose of a company and its goals for the future.

Question 18

An acquisition plan is developed if management determines that an acquisition or merger is required to implement the firm's business strategy.

Accepted Answer

An acquisition plan is developed when management decides that an acquisition or merger is necessary to carry out the company's business strategy.

Question 19

A merger or acquisition is generally not considered an example of an implementation strategy.

Accepted Answer

A merger or acquisition can be considered an implementation strategy as it involves a certain plan of action for integrating the two companies or organizations.

Question 20

Stakeholders only include a firm's shareholders.

Accepted Answer

Stakeholders include not only shareholders, but also employees, customers, suppliers, the government, and the community.

Quiz 4: Planning: Developing Business and Acquisition Plans: Phases 1 and 2 of the Acquisition Process