Question 1

An antitakeover tactic in which existing shareholders have the option to buy additional shares of stock at a discount to the current market price is called ______.

Accepted Answer

Poison pills are an antitakeover tactic used by a company to give shareholders certain rights in the event of a takeover by another firm. They are also known as shareholder rights plans.

Question 2

IBM, Memorial Sloan Kettering, and Cedars-Sinai have a _________ whereby IBM receives expert medical knowledge that it uses to leverage its technological skills to develop new medical insights.

Accepted Answer

Strategic alliances may be used to build jointly on the technological expertise of two or more companies. This may enable then to develop products technologically beyond the capability of the companies acting independently.

Question 3

The antitakeover tactic, _______, is when a firm offers to buy shares of their stock from a company (or individual) planning to acquire their firm at a higher price than the unfriendly company paid for it.

Accepted Answer

Greenmail is an effort by the target firm to prevent an impending takeover. When a hostile firm buys a large block of outstanding target company stock and the target company management feels that a tender offer is impending, they offer to buy the stock back from the hostile company at a higher price than the unfriendly company paid for it.

Question 4

According to Michael Porter, there is a tremendous allure to _________. It is the big play, the dramatic gesture. With one stroke of the pen you can add billions to size, get a front-page story, and create excitement in markets.

Accepted Answer

There is an excitement and associated recognition of making a major acquisition. Michael Porter of Harvard University noted that there is a tremendous allure to mergers and acquisitions. It is the big play, the dramatic gesture. With one stroke of the pen you can add billions to size, get a front-page story, and create excitement in markets.

Question 5

Internal development may be time consuming and, therefore, firms may forfeit the benefits of speed that growth through __________ and __________ can provide.

Accepted Answer

There are potential disadvantages to internal development. It may be time consuming; firms may forfeit the benefits of speed that growth through mergers or acquisitions can provide. This may be important among high-tech or a knowledge-based organization in fast-paced environments, where being an early mover is critical.

Question 6

Lionsgate (a Canadian-American entertainment company) and Alibaba (a Chinese e-commerce company) created _________ to open the Chinese market for the Lionsgate streaming shows and movies. Alibaba profits by getting access to content to increase demand for its own set-top media boxes.

Accepted Answer

A strategic alliance is a cooperative relationship between two (or more) firms. Alliances may be either informal or formal. Such cooperative relationships have many potential advantages, including entering new markets and diffusing new technologies.

Question 7

The term golden parachute refers to

Accepted Answer

A golden parachute is a prearranged contract with managers specifying that, in the event of a hostile takeover, the target company managers will be paid a significant severance package.

Question 8

Which of the following statements regarding internal development as a means of diversification is false?

Accepted Answer

Potential disadvantages to internal development include that it may be time consuming and that firms may forfeit the benefits of speed that growth through mergers can provide. This may be important to high-tech or a knowledge-based organization in fast-paced environments in which being an early mover is critical.

Question 9

The downsides or limitations of mergers and acquisitions include all of the following except:

Accepted Answer

There are several limitations of mergers and acquisitions including that takeover premiums paid for acquisitions are typically very high, competing firms often can imitate any advantages or copy synergies that result from the merger or acquisition, manager egos sometimes get in the way of sound business decisions, and cultural issues may doom the intended benefits from M and A endeavors.

Question 10

Which of the following is not part of a good guideline list for managing strategic alliances?

Accepted Answer

Strategic alliances and joint ventures should ensure the strengths contributed by the partners are unique; thus synergies created can be more easily sustained over the longer term. The goal is to develop synergies between partner contributions, resulting in a win-win situation. Moreover, the partners must be compatible and willing to trust each other. These partnerships may be undertaken with or without a contract.

Question 11

Divesting of businesses can accomplish many different objectives, except

Accepted Answer

Divesting a business can accomplish many different objectives including: enabling managers to focus their efforts more directly on the core businesses of the firm, providing the firm with more resources to spend on more attractive alternatives, and raising cash to help fund existing businesses.

Question 12

Antitakeover tactics include all of the following except

Accepted Answer

Antitakeover tactics are common, including greenmail, golden parachutes, and poison pills.

Question 13

Firms that choose to diversify through internal development must develop _________ that allow them to move __________ from initial opportunity recognition to market introduction.

Accepted Answer

Firms that choose to diversify through internal development must develop capabilities that allow them to move quickly from initial opportunity recognition to market introduction.

Question 14

Cooperative relationships such as __________ have potential advantages such as entering new markets, reducing manufacturing (or other) costs in the value chain, and developing and diffusing new technologies.

Accepted Answer

Strategic alliances and joint ventures have many potential advantages. Among these are entering new markets, reducing manufacturing (or other) costs in the value chain, and developing and diffusing new technologies.

Quiz 6: Corporate-Level Strategy: Creating Value Through Diversification