Question 1

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

Accepted Answer

A joint venture is (1) a good vehicle for pursuing an opportunity that is too complex,uneconomical,or risky for one company to pursue alone and (2) makes sense when the opportunities in a new industry require a broader range of competencies and know-how than an expansion-minded company can marshal.

Question 2

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

Accepted Answer

Corporate diversification via acquisition is (1) usually quicker than trying to launch a new operation and (2) offers an effective way to hurdle such entry barriers as acquiring technological know-how,establishing supplier relationships,achieving scale economies,building brand awareness,and securing adequate distribution.

Question 3

Diversification merits strong consideration whenever a single-business company

Accepted Answer

Diversifying into new industries always merits strong consideration whenever a single-business company encounters diminishing market opportunities and stagnating sales in its principal business.

Question 4

Which of the following statements about corporate diversification is incorrect?

Accepted Answer

All of the above statements are true,except "the more attractive an industry's prospects are for growth and good long-term profitability,the less expensive it can be to enter." Attractive industries are more expensive to enter.

Question 5

The cost-of-entry test for evaluating whether diversification into a particular industry is likely to build shareholder value involves determining whether

Accepted Answer

The cost to enter the target industry must not be so high as to erode the potential for good profitability and returns on investment.

Question 6

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves assessing whether the diversification move

Accepted Answer

Diversifying into a new business must offer potential for the company's existing businesses and the new business to perform better together under a single corporate umbrella than they would perform operating as independent,stand-alone businesses.

Question 7

Which of the following is an important appeal of a related diversification strategy?

Accepted Answer

Related diversification offers opportunities to transfer skills, expertise, technical know-how, or other capabilities from one business to another. This can create valuable synergies between the businesses, leading to cost savings, improved operations, and better performance overall.

Question 8

To test whether a particular diversification move has good prospects for creating added shareholder value,corporate strategists should use the

Accepted Answer

The three tests for judging whether a particular diversification move can create value for shareholders are the industry attractiveness test,the cost-of-entry test,and the better-off test.

Question 9

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

Accepted Answer

Generally,forming a start-up subsidiary to enter a new business (via internal development) has appeal only when (1) the parent company already has in-house most or all of the skills and resources needed to compete effectively; (2) there is ample time to launch the business; (3) internal entry has lower costs than entry via acquisition; (4) the targeted industry is populated with many relatively small firms such that the new start-up does not have to compete against large,powerful rivals; (5) adding new production capacity will not adversely impact the supply-demand balance in the industry; and (6) incumbent firms are likely to be slow or ineffective in responding to a new entrant's efforts to crack the market.

Question 10

The three tests for judging whether a particular diversification move can create value for shareholders are the

Accepted Answer

The three tests for judging whether a particular diversification move can create value for shareholders are the industry attractiveness test,the cost-of-entry test,and the better-off test.

Question 11

The attractiveness test for evaluating whether diversification into a particular industry is likely to build shareholder value involves determining whether

Accepted Answer

The industry to be entered through diversification must offer an opportunity for profits and return on investment that is equal to or better than that of the company's present business lineup.

Question 12

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

Accepted Answer

Businesses are "related" when their value chains possess competitively valuable cross-business relationships.

Question 13

Businesses are said to be "related" when

Accepted Answer

Businesses are "related" when their value chains possess competitively valuable cross-business relationships.

Question 14

To create value for shareholders via diversification,a company must

Accepted Answer

Diversification cannot be considered a success unless it results in added shareholder value-value that shareholders cannot capture on their own by spreading their investments across the stocks of companies in different industries.

Question 15

The task of crafting corporate strategy for a diversified company encompasses

Accepted Answer

Crafting a diversified company's overall corporate strategy involves four distinct tasks: (1) picking new industries to enter and deciding on the means of entry,(2) pursuing opportunities to leverage cross-business value chain relationships into competitive advantage,(3) establishing investment priorities and steering corporate resources into the most attractive business units,and (4) initiating actions to boost the combined performance of the corporation's collection of businesses.

Question 16

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

Accepted Answer

A joint venture (1) is a good vehicle for pursuing an opportunity that is too complex,uneconomical,or risky for one company to pursue alone and (2) makes sense when the opportunities in a new industry require a broader range of competencies and know-how than an expansion-minded company can marshal.

Question 17

Which one of the following is not one of the elements of crafting corporate strategy for a diversified company?

Accepted Answer

Crafting a diversified company's overall corporate strategy involves four distinct tasks: (1) picking new industries to enter and deciding on the means of entry,(2) pursuing opportunities to leverage cross-business value chain relationships into competitive advantage,(3) establishing investment priorities and steering corporate resources into the most attractive business units,(4) initiating actions to boost the combined performance of the corporation's collection of businesses.Choosing the appropriate value chain is not one of the four distinct tasks involved in crafting an overall corporate strategy.

Question 18

Diversifying into new businesses can be considered a success only if it

Accepted Answer

Diversification cannot be considered a success unless it results in added shareholder value-value that shareholders cannot capture on their own by spreading their investments across the stocks of companies in different industries.

Question 19

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

Accepted Answer

Generally,forming a start-up subsidiary to enter a new business (via internal development) has appeal only when (1) the parent company already has in-house most or all of the skills and resources needed to compete effectively; (2) there is ample time to launch the business; (3) internal entry has lower costs than entry via acquisition; (4) the targeted industry is populated with many relatively small firms such that the new start-up does not have to compete against large,powerful rivals; (5) adding new production capacity will not adversely impact the supply-demand balance in the industry; and (6) incumbent firms are likely to be slow or ineffective in responding to a new entrant's efforts to crack the market.

Question 20

Diversification ought to be considered when a

Accepted Answer

Diversifying into new industries always merits strong consideration whenever a single-business company encounters diminishing market opportunities and stagnating sales in its principal business.

Quiz 8: Corporate Strategy: Diversification and the Multi-Business Company

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

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

Diversification merits strong consideration whenever a single-business company

Which of the following statements about corporate diversification is incorrect?

The cost-of-entry test for evaluating whether diversification into a particular industry is likely to build shareholder value involves determining whether

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves assessing whether the diversification move

Which of the following is an important appeal of a related diversification strategy?

To test whether a particular diversification move has good prospects for creating added shareholder value,corporate strategists should use the

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

The three tests for judging whether a particular diversification move can create value for shareholders are the

The attractiveness test for evaluating whether diversification into a particular industry is likely to build shareholder value involves determining whether

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

Businesses are said to be "related" when

To create value for shareholders via diversification,a company must

The task of crafting corporate strategy for a diversified company encompasses

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

Which one of the following is not one of the elements of crafting corporate strategy for a diversified company?

Diversifying into new businesses can be considered a success only if it

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

Diversification ought to be considered when a