Question 1

When costs of completing a business agreement (or deal of some sort)are over and above the price of the deal,what are they called?

Accepted Answer

Transaction costs are the costs incurred in the process of completing a business agreement or deal that are over and above the price of the deal. These costs can include fees, commissions, legal expenses, and other expenses associated with negotiating and finalizing the agreement.

Question 2

While acquisitions offer an enticing means for entering a new business,many fail to deliver on their promise,as they:

Accepted Answer

The answer of While acquisitions offer an enticing means for...

Question 3

If entry barriers are low and the industry is populated by small firms,internal development may be the preferred mode of entry.But if entry barriers cannot be overcome readily,then the only feasible entry route may be through a(n):

Accepted Answer

If entry barriers cannot be overcome readily, the only feasible entry route may be through the acquisition of a well-established company. This is because acquiring an established company can provide instant access to the market, established customer base, and established brand recognition. This is usually a faster and more certain way to enter the market than internal development or joint venture.

Question 4

In unrelated businesses,they:

Accepted Answer

Unrelated businesses have dissimilar value chains and resource requirements and there are no competitively important cross-business relationships at the value chain level. This means that they operate independently of each other and do not have any shared advantages or synergies.

Question 5

What is the name of the process for developing new businesses as an outgrowth of a company's established business operations?

Accepted Answer

The process described is commonly known as corporate venturing, corporate entrepreneurship, or intrapreneurship. It involves developing new businesses within a company by leveraging the resources, capabilities, and knowledge of the established business operations. Options B through D are not accurate descriptions of this process.

Question 6

Internal development of a new business subsidiary has become an increasingly important means for entering a desirable new business when:

Accepted Answer

Internal development of a new business subsidiary becomes an increasingly important means for entering a desirable new business when the company has ample time and adequate resources to launch the new internal startup business from the ground up. This allows greater control over the development of the new business and its growth strategy.

Question 7

Generally internal development of a new business has appeal,except when:

Accepted Answer

When incumbent firms are likely to be fast or effective in preempting a new entrant's efforts to crack the market, it may be better to consider external development options such as acquisition or licensing instead of internal development.

Question 8

The essential requirement for different businesses to be "related" is that:

Accepted Answer

The essential requirement for different businesses to be "related" is that their value chains exhibit competitively valuable cross-business relationships, which means that the businesses should have interdependency and can create synergy through coordination and sharing of resources, capabilities and competencies. This interdependency can lead to increased efficiency, lower costs, and increased competitiveness. The other choices (B, C, D, E) are not sufficient to establish a strong relationship between the businesses.

Question 9

Acquisition of an existing business is an attractive strategy option for entering a promising new industry because it:

Accepted Answer

Acquisition of an existing business allows the acquiring company to quickly overcome entry barriers and establish a strong position in the target industry, which may take longer and require more resources if the company attempts to launch a brand-new startup operation. Additionally, this strategy is likely to help the diversified company pass the competitive advantage test, which is important for building shareholder value. Option B is incorrect because the statement that acquisition is less expensive than starting a new business is not always true. Option C is not correct because acquisition does not eliminate all risks associated with market entry. Option D is not correct because shareholder value and profitability tests are important for any strategy, and acquisition alone does not guarantee their achievement.

Question 10

The big dilemma an aggressive acquisition-minded firm faces is whether:

Accepted Answer

The main dilemma for an acquisition-minded firm is deciding between paying a premium for a successful company or acquiring a struggling company at a discount, as this decision impacts the potential risks and rewards of the acquisition.

Question 11

The transaction costs of completing a business agreement or deal of some sort,over and above the price of the deal,can include:

Accepted Answer

The transaction costs of completing a business agreement or deal can include all of the options listed, i.e., costs of searching for an attractive target, evaluating its worth, bargaining costs, and the costs of completing the transaction. These costs add up to the total cost incurred by the parties involved over and above the price of the deal.

Question 12

A popular strategy for entering new businesses and accomplishing diversification is:

Accepted Answer

Acquisition of an existing business is a popular strategy because it allows the company to quickly enter the target industry with an established customer base, operational efficiencies, and a market position. It also eliminates the need to start from scratch and deal with entry barriers, which saves time and resources. Joint ventures and strategic alliances may bring benefits to the company, but they may also involve sharing profits, knowledge, or control. Undertaking an internal startup may be too risky or resource-intensive, and may not have the same market advantages as an established business.

Question 13

A joint venture is an attractive way for a company to enter a new industry when:

Accepted Answer

A joint venture is a good option when a firm lacks some essential skills, capabilities, or resources to enter a new industry. By partnering with another firm that has the necessary expertise and resources, the company can leverage their strengths and mitigate their weaknesses. This can help the firm quickly enter the industry and compete effectively.

Question 14

When speed is of the essence,firms should use an acquisition entry strategy because:

Accepted Answer

The answer of When speed is of the essence,firms should...

Question 15

Which of the following questions does not relate to the choice of how best to enter a new business?

Accepted Answer

This question is unrelated to the choice of how best to enter a new business, as it focuses solely on financial gain rather than strategic considerations of entry mode.

Question 16

Which one of the following is NOT a factor that makes it appealing to diversify into a new industry by forming an internal startup subsidiary to enter and compete in the target industry?

Accepted Answer

The other four factors make it appealing to diversify into a new industry by forming an internal startup subsidiary, as they indicate lower risks, lower costs, and a greater likelihood of success. However, rapid industry growth and few dominant competitors may attract many newcomers who could create oversupply conditions and intensify competition, making it harder for a new entrant to achieve profitability and market share.

Question 17

When all the resources are available or can be easily purchased or leased,the best alternative is to enter the new business opportunity via:

Accepted Answer

When all the resources are available or easily accessible, internal development is the best alternative. It allows the company to have full control over the new business opportunity and can utilize its existing resources and expertise. Other alternatives like acquisition, joint venture or partnership could involve sharing control and may not fully utilize the company's resources.

Question 18

A joint venture is an attractive way for a company to enter a new industry when:

Accepted Answer

Joint ventures are an attractive option for companies when they lack the necessary resources or competencies to pursue an opportunity alone. This is particularly true for complex or risky opportunities or for entering foreign markets where a local partner may be necessary. The other answer choices may also be situations where a joint venture is appropriate, but they are not as comprehensive as E.

Question 19

Diversifying into a new industry by forming a new internal subsidiary to enter and compete in the target industry is attractive when:

Accepted Answer

Forming a new internal subsidiary is attractive when there is ample time to launch the new business from the ground up and entry barriers can be hurdled at an acceptable cost. This suggests that there is potential for profitability and success in the new industry, and that the company has the resources and capabilities to overcome the challenges of establishing a presence in the industry. The other options listed do not provide as strong a rationale for pursuing a diversification strategy.

Question 20

An acquisition premium is the amount by which the price offered for an existing business exceeds:

Accepted Answer

An acquisition premium represents the extra amount of money paid for the acquisition of an existing business relative to its pre-acquisition market value. It is the premium paid by the acquiring company to the target company to persuade it to sell its business. Therefore, option A is the correct choice as it states that the offered price exceeds the pre-acquisition market value of the target company.

Quiz 8: Corporate Strategy: Diversification and the Multibusiness Company

When costs of completing a business agreement (or deal of some sort) are over and above the price of the deal,what are they called?

While acquisitions offer an enticing means for entering a new business,many fail to deliver on their promise,as they:

If entry barriers are low and the industry is populated by small firms,internal development may be the preferred mode of entry.But if entry barriers cannot be overcome readily,then the only feasible entry route may be through a(n) :

In unrelated businesses,they:

What is the name of the process for developing new businesses as an outgrowth of a company's established business operations?

Internal development of a new business subsidiary has become an increasingly important means for entering a desirable new business when:

Generally internal development of a new business has appeal,except when:

The essential requirement for different businesses to be "related" is that:

Acquisition of an existing business is an attractive strategy option for entering a promising new industry because it:

The big dilemma an aggressive acquisition-minded firm faces is whether:

The transaction costs of completing a business agreement or deal of some sort,over and above the price of the deal,can include:

A popular strategy for entering new businesses and accomplishing diversification is:

A joint venture is an attractive way for a company to enter a new industry when:

When speed is of the essence,firms should use an acquisition entry strategy because:

Which of the following questions does not relate to the choice of how best to enter a new business?

Which one of the following is NOT a factor that makes it appealing to diversify into a new industry by forming an internal startup subsidiary to enter and compete in the target industry?

When all the resources are available or can be easily purchased or leased,the best alternative is to enter the new business opportunity via:

A joint venture is an attractive way for a company to enter a new industry when:

Diversifying into a new industry by forming a new internal subsidiary to enter and compete in the target industry is attractive when:

An acquisition premium is the amount by which the price offered for an existing business exceeds: