Question 1

Although sharing resources among the different businesses within the multibusiness corporation can offer substantial cost economies,these savings are often offset by:
A)Internal conflicts between divisional managers
B)The need for each business to have resources and facilities that are specialized to its own requirements
C)The costs of coordinating such resource sharing
D)The unwillingness of each business to pay for the maintenance of common resources.

Accepted Answer

The answer of Although sharing resources among the different businesses...

Question 2

Managing linkages among businesses through transferring skills and sharing resources would appear to offer greater potential for creating value than portfolio management because:
A)Economies of scope have a greater impact on profitability than industry attractiveness
B)The size of acquisition premiums means that acquisitions typically destroy value for the acquirer
C)Increasingly efficient capital markets limit the potential either to acquire undervalued companies or to create value through internal capital allocation among businesses
D)Stock markets apply a conglomerate discount to highly diversified companies

Accepted Answer

Efficient capital markets reduce the opportunity to acquire undervalued companies or create value through internal capital allocation, making managing linkages through skills and resources more valuable.

Question 3

The changes in the ways in which CEOs and senior executives have been compensated in recent decades,particularly the growth of share options and performance incentives have:
A)Done much to align the interests of top management with those of shareholders
B)Provided major incentives for CEOs to manipulate and mis-report financial performance
C)Greatly boosted compensation while doing little to align the interests of CEOs and shareholders
D)Helped t ensure that market forces determine executive compensation

Accepted Answer

The answer of The changes in the ways in which...

Question 4

The choice between strategic planning and financial control as a corporate management style for a particular company depends upon:
A)Whether company is managed in the interest of shareholders or stakeholders
B)The degree of maturity of the businesses
C)The relatedness of the businesses and the duration of their investment projects
D)Whether the goals of the company are growth or profitability

Accepted Answer

The relatedness of businesses and duration of investment projects are important factors to consider when choosing between strategic planning and financial control. If the businesses are related and have a long-term investment horizon, strategic planning may be more suitable since it focuses on long-term goals and competitive advantage. On the other hand, financial control may be more appropriate for unrelated businesses with short investment horizons, as it emphasizes the efficient use of resources and profitability. The other options listed are also important factors to consider, but they are not the primary determinants of whether strategic planning or financial control is the best choice.

Question 5

The principal mechanisms through which the corporate headquarters seeks to improve the strategic and operational management of its businesses are:
A)Management development activities
B)Providing corporate services
C)Creating strong financial incentives for business unit managers
D)Direct involvement in business-level management,strategic planning,and performance management and financial control

Accepted Answer

The most effective mechanism for the corporate headquarters to improve the strategic and operational management of its businesses is through direct involvement in business-level management, strategic planning, and performance management and financial control. This allows better coordination and alignment of goals and strategies among the different business units of the company. Management development activities and providing corporate services may support these efforts, but they are not necessarily the principal mechanisms used for improvement. Creating strong financial incentives for business unit managers can also be effective, but it must be done in conjunction with direct involvement and oversight from the corporate headquarters.

Question 6

Corporate management can enhance the performance of its individual businesses through imposing corporate systems for performance management and resource allocation,however,the main downside of such corporate intervention is:
A)Constraining innovation
B)Undermining autonomy and motivation of business-level managers
C)Limiting opportunities for exploiting synergies between businesses
D)Requiring an excessive focus on shareholder interests over the interests of other stakeholders

Accepted Answer

Imposing corporate systems for performance management and resource allocation can undermine the autonomy and motivation of business-level managers because they may feel that their decision-making power is being restricted. This can lead to demotivation and a lack of initiative among business-level managers, which can ultimately harm the performance of individual businesses.

Question 7

22,The greatest deficiency of BP plc's decentralized,performance management system based upon performance contracts for individual managers that was implemented by CEO John Browne at during 1995-2007,was
A)Power was not really decentralized because of Browne's dominant influence
B)As a former state-owned oil company,BP's culture could not adapt to a performance management system that emphasized individual initiative
C)Decentralized,performance management is not appropriate to an oil and gas major where time horizons are long term,key strategic decisions must be centralized,and risk management is critical
D)Oil and gas companies must be rum by engineers and technical specialists who do not respond well to performance targets.

Accepted Answer

The greatest deficiency of BP's decentralized,performance management system was that it was not appropriate to an oil and gas major where time horizons are long term, key strategic decisions must be centralized, and risk management is critical. In an industry where safety and risk management are of utmost importance, a centralized approach to decision making is necessary to ensure that all aspects of the business are considered and risks are properly managed. BP's decentralized approach left room for errors and misjudgments that led to the Deepwater Horizon disaster in 2010.

Question 8

IBM and Samsung Electronics are examples of large,mature corporations that have:
A)Sustained their positions as two of the world's most innovative companies in terms of patents awarded and new products launched
B)Developed corporate systems that promote large-scale strategic change and the development of major new areas of businesses
C)Demonstrate the potential of large established companies rich in complementary resources to outperform technology-based start-ups
D)Demonstrate that strong leadership and centralized decision making is the key to corporate success during turbulent times.

Accepted Answer

IBM and Samsung Electronics are examples of large, mature corporations that have developed corporate systems that promote large-scale strategic change and the development of major new areas of businesses.

Question 9

The failure of companies such as Enron,WorldCom,Royal Bank of Scotland,and Kaupthing Bank of Iceland illustrate:
A)The hazards of growth through acquisition
B)The ineffectiveness of most company boards of directors
C)The potential for companies to be vehicles for the personal ambitions of chief executives
D)How easily the stock market is fooled by ambitious,visionary CEOs

Accepted Answer

The failure of these companies shows that they were driven by the personal ambitions and desires of their chief executives, who were motivated more by personal gain than by the long-term success of their companies. The case of Enron, for example, shows how the company's CEO used questionable accounting practices to inflate the company's earnings and enrich himself and other top executives. Similarly, the case of WorldCom illustrates how the company's CEO engaged in accounting fraud to hide the true financial condition of the company and personally enrich himself. These examples demonstrate the potential for companies to be vehicles for the personal ambitions of their leaders. While growth through acquisition and ineffective boards of directors may also contribute to company failures, they are not the main lesson to be learned from these cases.

Question 10

Oliver Williamson said two main corporate governance advantages of the multidivisional structure ("M-form")for large,diversified companies were:
A)Allowing decision-making to be decentralized while centralizing high-frequency decision making
B)Allowing decision-making to be decentralizing while centralizing strategic decision making
C)Creating competitive internal capital market in which capital allocation is not dominated by political consideration and creating a corporate headquarters that can represent shareholder interests
D)Ensuring that the divisional managers were dependent on capital allocation at the corporate level

Accepted Answer

The multidivisional structure (M-form) allows for the creation of a competitive internal capital market in which capital allocation is not influenced by political considerations. Additionally, it creates a corporate headquarters that can represent shareholder interests. Thus, the correct answer is C. Option A is incorrect because it talks about centralizing high-frequency decision making, which is not a benefit of the M-form. Option B is incorrect because it talks about centralizing strategic decision making, which is not necessarily a feature of the M-form. Option D is also incorrect because it suggests that divisional managers are dependent on the capital allocation at the corporate level, which is not a benefit of the M-form.

Question 11

The corporate headquarters of diversified companies that comprise loosely-related businesses (e.g.Berkshire Hathaway,Danaher,Jardine Matheson,and the Tata Group)differ from the corporate headquarters of closely-related business (e.g.Royal Dutch Shell,IBM,BASF,and Unilever)in the following way:
A)They are more inclined to intervene in the management of their business units
B)They are more oriented towards stakeholder rather than shareholder objectives
C)They are more focused upon creating shareholder value
D)They are smaller

Accepted Answer

Corporate headquarters of diversified companies comprising loosely-related businesses tend to be smaller because they are less involved in the day-to-day operations of their business units, allowing those units more autonomy. This contrasts with closely-related businesses, where the corporate headquarters often play a more significant role in management and operations, necessitating a larger staff and more resources.

Question 12

Corporate governance is:
A)The way a firm is organized
B)The way a firm makes decisions
C)The system by which the top management of a firm is directed and controlled
D)The way a firm appoints and replaces its CEO

Accepted Answer

Corporate governance refers to the system by which the top management of a firm is directed and controlled. This includes the establishment of clear roles and responsibilities, decision-making processes, and accountability mechanisms for the board of directors and senior executives. While aspects of organizational structure and CEO appointment may be relevant to corporate governance, they are not the defining characteristics of this concept.

Question 13

A major disadvantage of legislation to improve corporate governance by imposing more stringent reporting requirements on public companies and increasing the penalties that directors face for negligence and misconduct is:
A)Preoccupation with compliance means that boards of directors offer less strategy guidance
B)More companies are choosing to go private
C)Fewer qualified individuals are willing to become board members
D)Increased regulation reinforcing the male domination of corporate boards

Accepted Answer

The preoccupation with compliance due to more stringent reporting requirements and increased penalties for negligence and misconduct can divert the attention of the board of directors from offering strategic guidance. Compliance becomes the primary focus rather than innovation and growth, leading to a potential disadvantage. Options B, C, and D are not related to the given scenario.

Question 14

Which of the following is not a key difference between a multidivisional company and a holding company?
A)Multidivisional companies have a centralized treasury;holding companies do not
B)The parent of a holding company appoints the boards of directors of its subsidiaries;the HQ of a multidivisional company directly appoints divisional managers
C)The subsidiaries of a holding company are responsible for their own financing decisions;the divisions of a multidivisional company need only to consider their credit ratings
D)Multidivisional corporations typically have a single,integrated strategic planning process;holding companies do not.

Accepted Answer

The key difference not accurately described is that in both holding companies and multidivisional companies, the financing decisions can vary significantly. While it's true that subsidiaries of a holding company often handle their own financing, the statement about divisions of a multidivisional company only needing to consider their credit ratings simplifies the complexity of internal financing decisions, which can involve allocations of capital from the central treasury based on various strategic and operational considerations, not just credit ratings.

Question 15

The type of corporate strategy through which most leading private equity groups such as Carlyle Group,Kohlberg Kravis Roberts,and Blackstone add value to the businesses they acquire is best described as:
A)Portfolio management
B)Restructuring
C)Transferring skills
D)Sharing resources

Accepted Answer

Restructuring is the type of corporate strategy through which private equity groups add value to the businesses they acquire. This may involve changes to the organizational structure, management, operations, or financial structure of the company in order to increase efficiency, profitability, and overall value. Portfolio management, transferring skills, and sharing resources may also be part of the strategy, but they are not the primary focus.

Quiz 13: Implementing Corporate Strategy: Managing the Multibusiness Firm

Although sharing resources among the different businesses within the multibusiness corporation can offer substantial cost economies,these savings are often offset by:

Managing linkages among businesses through transferring skills and sharing resources would appear to offer greater potential for creating value than portfolio management because:

The changes in the ways in which CEOs and senior executives have been compensated in recent decades,particularly the growth of share options and performance incentives have:

The choice between strategic planning and financial control as a corporate management style for a particular company depends upon:

The principal mechanisms through which the corporate headquarters seeks to improve the strategic and operational management of its businesses are:

Corporate management can enhance the performance of its individual businesses through imposing corporate systems for performance management and resource allocation,however,the main downside of such corporate intervention is:

22,The greatest deficiency of BP plc's decentralized,performance management system based upon performance contracts for individual managers that was implemented by CEO John Browne at during 1995-2007,was

IBM and Samsung Electronics are examples of large,mature corporations that have:

The failure of companies such as Enron,WorldCom,Royal Bank of Scotland,and Kaupthing Bank of Iceland illustrate:

Oliver Williamson said two main corporate governance advantages of the multidivisional structure ("M-form") for large,diversified companies were:

The corporate headquarters of diversified companies that comprise loosely-related businesses (e.g.Berkshire Hathaway,Danaher,Jardine Matheson,and the Tata Group) differ from the corporate headquarters of closely-related business (e.g.Royal Dutch Shell,IBM,BASF,and Unilever) in the following way:

Corporate governance is:

A major disadvantage of legislation to improve corporate governance by imposing more stringent reporting requirements on public companies and increasing the penalties that directors face for negligence and misconduct is:

Which of the following is not a key difference between a multidivisional company and a holding company?

The type of corporate strategy through which most leading private equity groups such as Carlyle Group,Kohlberg Kravis Roberts,and Blackstone add value to the businesses they acquire is best described as: