Question 1

_____ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.

Accepted Answer

Influence costs occur due to political maneuvering by managers to influence capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.

Question 2

A strategy of _____ will be most beneficial for a firm to enhance its overall corporate performance.

Accepted Answer

A strategy of related-constrained or related-linked diversification is more likely to enhance corporate performance than either a single or dominant level of diversification or an unrelated level of diversification. The reason is that the sources of value creation include not only restructuring, but more fundamentally, the potential benefits of economies of scope and scale.

Question 3

The 3-D television division of a large consumer electronics company has been recognized as a question mark.The company's LCD television division has been categorized under dogs.Which of the following statements will hold well in this scenario?

Accepted Answer

In this scenario, the 3-D television division operates in a high-growth market, whereas the LCD television division operates in a low-growth market. It is not clear whether question marks will turn into dogs or stars. Their earnings are low and unstable, but they might be growing. Dogs hold a small market share in a low-growth market; they have low and unstable earnings, combined with neutral or negative cash flows.

Question 4

The solar-powered car division of a large automobile company has been experiencing negative cash flows though the market growth for such cars is predicted to be high.If the company invests further resources into this division,it can increase its relative market share in the future.However,if due to technological changes the car cannot create sufficient consumer demand,then the division can prove to be unprofitable.In the Boston Consulting Group (BCG)growth-share matrix,the solar-powered car division will be categorized under

Accepted Answer

In the Boston Consulting Group (BCG) growth-share matrix, the solar-powered car division will be categorized under question marks. It is not clear whether question marks will turn into dogs or stars. Their earnings are low and unstable, but they might be growing. The cash flow, however, is negative.

Question 5

How is an equity alliance different from a joint venture?

Accepted Answer

An equity alliance involves taking ownership in a partner; a joint venture involves two or more people owning a firm.

Question 6

How can a firm pursuing a diversification strategy enhance its overall corporate performance by leveraging financial economies?

Accepted Answer

Internal capital markets can be a source of value creation in a diversification strategy if the conglomerate's headquarters does a more efficient job of allocating capital through its budgeting process than what could be achieved in external capital markets.

Question 7

BestDrive Inc.is a large automobile company.The company's petrol cars strategic business unit (SBU)has been recognized as a cash cow,and its hybrid electric cars SBU has been categorized under stars.Which of the following can be inferred from this scenario?

Accepted Answer

From this scenario, it can be inferred that the petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market. Cash cows are strategic business units that compete in a low-growth market but hold considerable market share. A corporation's star strategic business units (SBUs) hold a high market share in a fast-growing market. Their earnings are high and either stable or growing.

Question 8

The smartphone division of the large consumer electronics company,True Electra Inc.,has a significant market share in the fast-growing cell phone market.If the company invests further into this division,it will be able to reap increased cash flows.In the Boston Consulting Group (BCG)growth-share matrix,the smartphone division of True Electra will be categorized under

Accepted Answer

In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of True Electra Inc. will be categorized under stars. A corporation's star strategic business units (SBUs) hold a high market share in a fast-growing market. Their earnings are high and either stable or growing.

Question 9

There are many reasons why firms need to grow.Which of the following reasons is strongly influenced by economies of scale?

Accepted Answer

Firms are motivated to grow in order to lower their cost. A larger firm may benefit from economies of scale, thus driving down average costs as their output increases.

Question 10

Real Goods Inc.is a large conglomerate.The company's beverages strategic business unit (SBU)has been recognized as a cash cow,and its tobacco SBU has been categorized as a dog.Which of the following can be inferred from this scenario?

Accepted Answer

From this scenario, it can be inferred that while the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low. Cash cows are strategic business units that compete in a low-growth market but hold considerable market share. Dogs hold a small market share in a low-growth market; they have low and unstable earnings, combined with neutral or negative cash flows.

Question 11

Caring Ketchup Inc.makes organic ketchup.To promote its products,this firm decided to make bottles in the shape of tomatoes.To accomplish this,Caring Ketchup worked with its bottle manufacture to create a set of unique molds for its bottles.Which of the following specialized assets does this example demonstrate?

Accepted Answer

This example demonstrates physical-asset specificity, which includes assets whose physical and engineering properties are designed to satisfy a particular customer, such as bottling machinery.

Question 12

Firms that use taper integration also use _____ when they rely on outside-market firms for some of their supplies.

Accepted Answer

Taper integration is a way of orchestrating value activities in which a firm is backwardly integrated, but it also relies on outside-market firms for some of its supplies.

Question 13

Which of the following is a drawback of vertical integration?

Accepted Answer

Vertical integration increases the potential of legal repercussions. Due to monopoly concerns, vertical integration has not gone completely unchallenged by the Federal Trade Commission and the Justice Department.

Question 14

Strategic business units that have a relatively low market share but have the potential to grow are best categorized under _____ in the Boston Consulting Group (BCG)growth-share matrix.

Accepted Answer

It is not clear whether question marks will turn into dogs or stars. Their earnings are low and unstable, but they might be growing. The cash flow, however, is negative.

Question 15

_____,which are incurred when pursuing a related-diversification strategy,are a function of the number,size,and types of businesses that are linked to one another.

Accepted Answer

A related-diversification strategy entails coordination costs, which are a function of the number, size, and types of businesses that are linked to one another.

Question 16

Decisions relating to the range of products and services a firm will offer determine the firm's

Accepted Answer

The range of products and services that a firm decides to offer determines its level of diversification.

Question 17

The managers at AHL Chemicals Inc.decided that their firm needed to diversify because of falling sales and lower performance in one sector.How does diversifying compensate for the lackluster performance in this sector?

Accepted Answer

Firms often attempt to reduce risk by diversifying their product and service portfolio through competing in a number of different industries. The rationale behind these diversification moves is that falling sales and lower performance in one sector might be compensated by higher performance in another.

Question 18

RoboToys,Inc.is involved in the production of robotic toys.This firm produces the raw materials,including metals and oils for plastic; creates the integrated circuits,displays,and batteries; and assembles the toys.Which of the following stages of the industry value chain is RoboToys involved in?

Accepted Answer

RoboToys is involved in stages 1, 2, and 3 of the industry value chain. Stage 1 deals with producing raw materials, stage 2 deals with producing components, and stage 3 involves assembling the product.

Question 19

Which of the following motivations for business growth involves principal-agent problems?

Accepted Answer

Firms may grow to achieve goals that benefit its managers more than their stockholders. This motivation for managers is called the principal-agent problem.

Question 20

A corporation's star SBUs will

Accepted Answer

A corporation's star strategic business units (SBUs) hold a high market share in a fast-growing market. Their earnings are high and either stable or growing.

Quiz 8: Corporate Strategy: Vertical Integration and Diversification