Question 1

The relatively poor performance of diversified firms is known as the diversification discount.

Accepted Answer

The answer of The relatively poor performance of diversified firms...

Question 2

Which of the following is true about market penetration?
A) It involves trying to gain additional share of a firm's existing markets using existing products.
B) It involves creating new products to serve existing markets.
C) It involves creating new products and trying to sell them within new markets.
D) It involves entering entirely new industries.
E) It involves moving into a new industry that has important similarities with the firm's existing industries.

Accepted Answer

Market penetration focuses on increasing a firm's market share within existing markets using its current products, rather than developing new products or entering new markets.

Question 3

Market development differs from market penetration in that market development:
A) involves trying to sell existing products within new markets.
B) involves gaining additional share of existing markets using existing products.
C) involves creating new products to serve existing markets.
D) involves the joining of two similarly-sized companies into one company.
E) involves entering a new value chain.

Accepted Answer

Market development focuses on expanding into new markets with existing products, while market penetration aims to increase market share within existing markets using existing products.

Question 4

Portfolio planning is a process that helps executives assess their firm's prospects for success within each of its industries, offers suggestions about what to do within each industry, and provides ideas for how to allocate resources across the industries.

Accepted Answer

Portfolio planning involves evaluating a company's various business units or product lines to determine their potential for success and guide strategic decisions on resource allocation.

Question 5

Porter's five forces analysis is the best-known approach to portfolio planning.

Accepted Answer

Porter's five forces analysis is a framework for analyzing the competitive forces within an industry, not specifically for portfolio planning. Portfolio planning often involves different tools, such as the BCG matrix.

Question 6

Liquidation involves simply shutting down portions of a firm's operations, often at a tremendous financial loss.

Accepted Answer

The answer of Liquidation involves simply shutting down portions of...

Question 7

Which of the following concentration strategies involves entering a new retail chain to sell an existing product?
A) Vertical integration
B) Related diversification
C) Product development
D) Market penetration
E) Market development

Accepted Answer

Market development involves entering new markets or channels, such as a new retail chain, to sell existing products.

Question 8

Which of the following concentration strategies involves selling existing products in new geographic areas?
A) Vertical integration
B) Related diversification
C) Product development
D) Market penetration
E) Market development

Accepted Answer

Market development involves selling existing products in new geographic areas.

Question 9

Using the BCG matrix requires a firm's businesses to be categorized as high or low along two dimensions: its share of the market and the growth rate of its industry.

Accepted Answer

The BCG matrix categorizes businesses based on market share and industry growth rate, identifying them as Stars, Cash Cows, Question Marks, or Dogs.

Question 10

Market development involves:
A) creating new products to serve existing markets.
B) creating new products and trying to sell them within new markets.
C) integrating existing products to serve existing markets better.
D) taking existing products and trying to sell them within new markets.
E) trying to gain additional share of a firm's existing markets using existing products.

Accepted Answer

Market development involves taking existing products and trying to sell them within new markets, expanding the reach of the current product offerings.

Question 11

According to the BCG matrix, executives must decide whether to build cash cows into stars or divest them.

Accepted Answer

In the BCG matrix, cash cows are typically stable, profitable products that generate steady cash flow. They are not usually built into stars; instead, the focus is on maintaining their profitability.

Question 12

The BCG matrix analysis suggests that cash cows have bright prospects and thus are good candidates for growth.

Accepted Answer

The BCG matrix suggests that cash cows generate steady cash flow but have low growth prospects, as they operate in mature markets.

Question 13

Moreau Musical Instruments Inc, a company that manufactures stringed instruments and amplifiers, features famous musicians in print and television ads to increase the sale of their products. The firm aims to gain greater market share within the musical instrument manufacturing industry. Which of the following concentration strategies is this an example of?
A) Spin-off
B) Related diversification
C) Product development
D) Market penetration
E) Market development

Accepted Answer

Market penetration involves increasing sales of existing products to the current market, which is what Moreau Musical Instruments Inc is doing by using famous musicians in ads to boost sales and gain market share.

Question 14

_____ involves trying to gain additional share of a firm's existing markets using existing products.
A) Spin-off
B) Related diversification
C) Product development
D) Market penetration
E) Market development

Accepted Answer

Market penetration involves increasing a firm's market share in its existing markets using its existing products.

Question 15

Companies use concentration strategies to grow within an industry. A company can use one, two, or all three as part of its effort to excel within an industry. Which of the following are concentration strategies?
A) Market Penetration
B) Market Development
C) Product Development
D) A & B
E) A, B, & C

Accepted Answer

Concentration strategies include market penetration, market development, and product development. These strategies focus on increasing a company's presence and success within its current industry.

Question 16

The BCG matrix analysis suggests that profits from cash cows should be invested back into cash cows.

Accepted Answer

The BCG matrix suggests that profits from cash cows should be invested into question marks or stars to foster growth and ensure future profitability.

Question 17

Comfort Shoes Inc. is a firm that manufactures orthopedic shoes and sells them at retail stores in New York. Based on the popularity of the shoes, the firm decides to open an outlet in New Jersey to sell the existing line of orthopedic shoes. In this example, Comfort Shoes Inc. uses which of the following strategies?
A) Market penetration
B) Product development
C) Related diversification
D) Market development
E) Vertical integration

Accepted Answer

Comfort Shoes Inc. is expanding its market by selling its existing products in a new geographical area, which is a market development strategy.

Question 18

Sheets Brand Energy Strips experimented with a strategy in 2011. The firm made a deal with the Atlanta branch of Budget Rent a Car to wrap rental cars with an ad. The benefit to customers was that driving one of these mobile billboards saved a lot of money. A renter who would have paid $300 for a four-day rental only needed to pay $88 to rent a car featuring the wrap. Sheets benefitted because the cars spread their brand everywhere the renter travelled. Sheets used which of the following strategies?
A) Market penetration
B) Product development
C) Related diversification
D) Horizontal integration
E) Vertical integration

Accepted Answer

Sheets Brand Energy Strips used a market penetration strategy by increasing brand exposure and awareness through advertising on rental cars, aiming to reach more customers and increase market share.

Question 19

Executives sometime use diversification strategies to overcome the divestment discount.

Accepted Answer

The answer of Executives sometime use diversification strategies to overcome...

Question 20

Diversification involves creating a new company whose stock is owned by investors.

Accepted Answer

Diversification refers to a strategy of spreading investments across various financial assets, industries, or other categories to reduce risk, not creating a new company.

Quiz 8: Selecting Corporate-Level Strategies

The relatively poor performance of diversified firms is known as the diversification discount.

Which of the following is true about market penetration?

Market development differs from market penetration in that market development:

Portfolio planning is a process that helps executives assess their firm's prospects for success within each of its industries, offers suggestions about what to do within each industry, and provides ideas for how to allocate resources across the industries.

Porter's five forces analysis is the best-known approach to portfolio planning.

Liquidation involves simply shutting down portions of a firm's operations, often at a tremendous financial loss.

Which of the following concentration strategies involves entering a new retail chain to sell an existing product?

Which of the following concentration strategies involves selling existing products in new geographic areas?

Using the BCG matrix requires a firm's businesses to be categorized as high or low along two dimensions: its share of the market and the growth rate of its industry.

Market development involves:

According to the BCG matrix, executives must decide whether to build cash cows into stars or divest them.

The BCG matrix analysis suggests that cash cows have bright prospects and thus are good candidates for growth.

_____ involves trying to gain additional share of a firm's existing markets using existing products.

Companies use concentration strategies to grow within an industry. A company can use one, two, or all three as part of its effort to excel within an industry. Which of the following are concentration strategies?

The BCG matrix analysis suggests that profits from cash cows should be invested back into cash cows.

Executives sometime use diversification strategies to overcome the divestment discount.

Diversification involves creating a new company whose stock is owned by investors.