Question 1

Differentiate between joint venture and acquisition as a method to enter new industries. Discuss the advantages and disadvantages associated with each.

Accepted Answer

The answer of Differentiate between joint venture and acquisition as...

Question 2

Stanley's services firm wants to enter an embryonic market, but it doesn't have enough cash to purchase the required assets. Which of the following strategies would you recommend to Stanley?
A) Diversify through acquisition
B) Do not diversify at all
C) Diversify with an internal new venture
D) Diversify with a joint venture
E) Diversify through vertical integration

Accepted Answer

Diversifying with a joint venture would allow Stanley's services firm to partner with another company that already has the necessary assets and resources in the embryonic market. This allows Stanley to enter the market without having to make a significant investment in purchasing those assets outright.

Question 3

Identify and discuss the profitability justifications for pursuing a multibusiness model based on diversification.

Accepted Answer

The answer of Identify and discuss the profitability justifications for...

Question 4

Which of the following statements is false?
A) Joint ventures are preferable to acquisitions when the new business is related to the existing business.
B) Acquisitions are preferable to new ventures when speed is important.
C) Joint ventures are generally preferable to acquisitions when entry barriers are high.
D) Acquisitions can be both a reason for corporate decline and part of a turnaround strategy.
E) New ventures are preferable to acquisitions in the embryonic stage of the industry life cycle.

Accepted Answer

The answer of Which of the following statements is false?
A)...

Question 5

Which of the following is not necessary for a successful acquisition?
A) A good bidding strategy
B) A clear strategic rationale for making the acquisition
C) Quick completion of the acquisition
D) Thorough pre-acquisition screening
E) Post-acquisition audit to review the process and discuss ways to improve it

Accepted Answer

While time is of the essence in many acquisitions, quick completion should not compromise thorough due diligence and evaluation of the target company. Rushing the process can lead to costly mistakes and missed opportunities. A good bidding strategy, clear strategic rationale, thorough pre-acquisition screening, and post-acquisition audit are all important components of a successful acquisition.

Question 6

Which of the following is not a reason for the failure of an acquisition to generate the gains originally expected of it?
A) Poor post-acquisition integration
B) Overestimation of the potential gains to be derived from synergy
C) The high cost of making acquisitions
D) Lack of pre-acquisition screening
E) Overestimation of the potential costs of realizing synergies

Accepted Answer

Overestimation of the potential costs of realizing synergies is not typically a reason for failure; rather, underestimation of costs or overestimation of synergies can lead to failure.

Question 7

In 2007, Google bought YouTube. This is an example of which of the following?
A) Partnership
B) Strategic alliance
C) Joint venture
D) Acquisition
E) Merger

Accepted Answer

Google buying YouTube is an example of an acquisition, as Google fully acquired and now owns YouTube.

Question 8

Which of the following is the probable consequence of a company's inability to integrate two divergent corporate cultures after an acquisition?
A) Low management turnover
B) Poor commercialization of the product
C) An inability to realize potential gains from synergies
D) The stock of highly diversified companies is valued lower
E) Risks are shared by all

Accepted Answer

When two companies merge, there are likely to be cultural differences, which can hinder their ability to work together effectively. If the company cannot integrate these divergent cultures, there is likely to be an inability to realize potential gains from synergies, which defeats the purpose of the acquisition. This can lead to lost opportunities for growth and revenue.

Question 9

Joint ventures:
A) are an alternative to new ventures.
B) are attractive when speed is important.
C) are attractive when entry barriers are high.
D) should be done on a small scale.
E) reduce the risk of loss of proprietary knowledge.

Accepted Answer

The answer of Joint ventures:
A) are an alternative to new...

Question 10

Acquisitions often fail because of:
A) poor commercialization.
B) pre-acquisition screening that increases the time it takes to enter a market.
C) large-scale entry.
D) differences in corporate culture.
E) slowness in establishing significant market presence.

Accepted Answer

Differences in corporate culture can create conflicts and hinder integration between the acquiring and acquired companies, leading to the failure of the acquisition. Poor commercialization, pre-acquisition screening, large-scale entry, and slowness in establishing market presence are all potential factors that may contribute to an acquisition's failure, but they are not as significant as cultural differences.

Question 11

What are the two general types of diversification and when would one be preferred over the other?

Accepted Answer

The answer of What are the two general types of...

Question 12

What is perhaps the most important reason why acquisitions fail?
A) The expense of the acquisition
B) The timing of the acquisition
C) Management's unwillingness to make the necessary effort to make the acquisition work effectively
D) Incompetence on the part of workers in the acquired firm
E) Difficulties in coordinating manufacturing activities

Accepted Answer

The answer of What is perhaps the most important reason...

Question 13

At its simplest level, a joint venture may be thought of as:
A) a merger of two companies.
B) an acquisition of a smaller company by a larger company.
C) a form of strategic outsourcing.
D) a sign of weakness on the part of one of the companies.
E) pooling of resources by two or more firms to create new business.

Accepted Answer

A joint venture involves two or more firms pooling their resources in order to create a new business, which allows each firm to benefit from the other's expertise and resources. It is not a merger, acquisition, or sign of weakness. While joint ventures can involve outsourcing, they are not necessarily a form of strategic outsourcing as they often involve collaboration and sharing of risk and rewards.

Quiz 10: Corporate-Level Strategy: Related and Unrelated Diversification

Differentiate between joint venture and acquisition as a method to enter new industries. Discuss the advantages and disadvantages associated with each.

Stanley's services firm wants to enter an embryonic market, but it doesn't have enough cash to purchase the required assets. Which of the following strategies would you recommend to Stanley?

Identify and discuss the profitability justifications for pursuing a multibusiness model based on diversification.

Which of the following statements is false?

Which of the following is not necessary for a successful acquisition?

Which of the following is not a reason for the failure of an acquisition to generate the gains originally expected of it?

In 2007, Google bought YouTube. This is an example of which of the following?

Which of the following is the probable consequence of a company's inability to integrate two divergent corporate cultures after an acquisition?

Joint ventures:

Acquisitions often fail because of:

What are the two general types of diversification and when would one be preferred over the other?

What is perhaps the most important reason why acquisitions fail?

At its simplest level, a joint venture may be thought of as: