Question 1

Franke,a Swiss manufacturer of sink and facet systems,sold accessories through retail stores and then added Internet sales.Franke used

Accepted Answer

Franke used forward vertical integration by adding internet sales to their existing retail store sales. Forward vertical integration is the strategy of a company expanding its operations in the distribution chain by moving closer to the end-user/customer.

Question 2

The production company that provided the television show Who Wants to Marry My Dad? to be shown on night-time television to compete in a market begun by Joe Millionaire had to cut cash flow when the demand for the show did not live up to expectations.According to the BCG matrix,the TV show Who Wants to Marry My Dad? was an example of a

Accepted Answer

The show "Who Wants to Marry My Dad?" is considered a "dog" in the BCG matrix because it had low market share and low growth potential, leading to reduced cash flow.

Question 3

Using the Boston Consulting Group matrix,SBUs are classified on the basis of

Accepted Answer

The Boston Consulting Group matrix classifies SBUs based on their market share and market growth rate. This matrix helps in identifying which SBUs require more investment and which ones should be divested.

Question 4

Extra funds should be channeled to the ____,which is a product with a high share of a fast-growing market.

Accepted Answer

A "star" in the context of the BCG matrix refers to a product or business unit that has a high market share in a fast-growing industry, indicating it should receive significant investment to support its growth.

Question 5

Adolph Coors Company heavily developed Zima brand beer that was targeted to Generation Xers,but Zima gained only a small share of a rapidly growing market.According to the BCG matrix,Zima is an example of a

Accepted Answer

Zima is a new product in a rapidly growing market, therefore it has the potential to either become a star or a cash cow, or fail and become a dog. As it currently holds a small share in the market, it is still considered a question mark.

Question 6

Forms of diversification include

Accepted Answer

All of the given choices are forms of diversification. Acquisitions involve purchasing another company to expand the product or service offerings, vertical integration involves expanding into different stages of the supply chain, mergers involve combining two companies to expand the market share and internal development of new products involves creating new products or services within the existing business. Therefore, all of these choices are valid options for diversification.

Question 7

An example of ____ would be when credit card and mortgage divisions of banks often get their customers from the bank's commercial loan customers.

Accepted Answer

Synergy in related diversification refers to the benefits that can be obtained by sharing resources, capabilities or activities between related businesses. In this case, the credit card and mortgage divisions of banks are related to the bank's commercial loan customers, and therefore there is potential for the bank to leverage its resources and capabilities across these different divisions in order to create value and capture a competitive advantage. This is an example of synergy in related diversification.

Question 8

____ exists when the economic value together is greater than the value of the parts.

Accepted Answer

Synergy refers to the phenomenon where the combined economic value of two assets is greater than the sum of their individual economic values. In other words, the whole is greater than the sum of its parts, resulting in a positive synergy. This can occur when two companies merge, combining their expertise and resources to achieve greater success together than they would have individually. It can also occur within a single company when various departments work together to achieve a common goal, resulting in increased efficiency and productivity.

Question 9

Kraft Food Inc offered to buy Cadbury,a confection and beverage company.Which advantage of related diversification could result from the merging of these two businesses?

Accepted Answer

Synergy can result from related diversification because the combined resources, knowledge, and capabilities of the two businesses can create new opportunities and efficiencies that would not have been possible if the businesses were separate. In the case of Kraft Foods and Cadbury, they could potentially share distribution channels, research and development, and marketing efforts to increase their market share and profitability.

Question 10

Apple has a large share of the growing tablet market.Apple is an example of a

Accepted Answer

A star in the BCG matrix represents a product or a business unit that has a high market share in a growing market. Apple has a large share of the growing tablet market, making it a star.

Question 11

Which of the following is NOT an advantage inherent in related diversification?

Accepted Answer

Scope is not an inherent advantage of related diversification. Related diversification focuses on entering or expanding in industries related to a company's current operations, aiming at leveraging existing competencies, achieving synergies, reducing risk, and possibly reducing overhead costs through shared resources. Scope, in this context, refers to the breadth of areas a business operates in, which is not an advantage but rather a characteristic of how diversified the company is.

Question 12

____ are corporate-level strategies for becoming a diversified firm.

Accepted Answer

All of these strategies are commonly used by firms to become diversified. Internal developments of new products involve the company creating new products or services within its existing business structure. Backward vertical integration involves the company acquiring a supplier or manufacturer to gain more control over their supply chain. Mergers occur when two companies agree to combine their businesses, while acquisitions involve one company buying another company. All of these strategies can help a company become more diversified and expand its offerings.

Question 13

Philip Morris markets Marlboro cigarettes,the number-one selling cigarette brand in the world.Outside the United States,Marlboro generates huge profits that Philip Morris uses to support other less successful SBUs.According to the BCG matrix,Marlboro is an example of a

Accepted Answer

Marlboro is a well-established and dominant brand, generating significant profits for Philip Morris. As per the BCG matrix, Marlboro is a cash cow. The cash cow products generate high revenue and profits and require less investment for maintenance. Therefore, the company can allocate profits generated from Marlboro to support other less profitable SBUs.

Question 14

____ is the proportion of the market controlled by the product.

Accepted Answer

Relative market share is the proportion of the market controlled by the product.

Question 15

United Continental Holdings includes Continental Airlines,United Airline,Chelsea Food Services,and United Cruises,because it was thought that they can accomplish more joined together than they can operating as separate units.Which advantage of related diversification does this best represent?

Accepted Answer

United Continental Holdings represents the advantage of synergy, where the combination of related businesses creates a cooperative and mutually beneficial relationship that leads to better results than what the individual companies could achieve on their own.

Question 16

Hewlett Packard has a large share of the slowly growing PC market.This is an example of a

Accepted Answer

Hewlett Packard's large share of the slowly growing PC market indicates that it has a stable and dominant position in the market, similar to a cash cow in the Boston Consulting Group matrix. A cash cow is a business unit that has a high market share in a low-growth market and generates significant cash flows.

Question 17

Companies should invest carefully and monitor closely a ____,which is a product that has a small share of a growing market.

Accepted Answer

A question mark refers to a product with a small market share in a growing market, which means that it has potential to become a star in the future. However, investing in a question mark carries risks and requires careful monitoring, as it may not succeed in capturing significant market share.

Question 18

Porsche Automobil Holding and Volkswagen own each other's stock.They plan to integrate the companies in 2011.This diversification strategy is ____.

Accepted Answer

The diversification strategy of Porsche and Volkswagen is a merger, which involves the integration of two or more companies into a single entity. This is evident in the fact that they plan to integrate the companies in 2011, implying that they aim to form a new, combined company that will draw on the strengths and assets of both firms. A merger typically involves the exchange of stock and other assets, as well as the assumption of liabilities by the acquiring company. Therefore, choice E, merger, is the best option.

Question 19

Ford once supplied every part to its automobiles,except the rubber (it even tried to grow the trees,to no avail).This is an example of

Accepted Answer

Backward vertical integration involves a company taking control of its suppliers, which is the case with Ford. By supplying every part except the rubber, Ford was able to control the quality of its products and reduce costs by eliminating the markup that would come from purchasing parts from third-party suppliers. This also allowed for better coordination and communication in the production process. Forward vertical integration refers to a company taking control of its distributors or retailers, which is not applicable in this case. Unrelated diversification, horizontal integration, and a defender strategy are also not relevant to Ford's situation.

Question 20

One action that an organization may take with respect to an SBU classified as a dog is to sell it.It seems odd that one organization would want to buy another's dog.Which of the following might explain such a purchase?

Accepted Answer

Possible synergistic effects on the buying organization. Although the SBU is classified as a "dog" by the selling organization, the buying organization may see potential synergies or strategic advantages that could be gained by acquiring the SBU. This could include complementary products or services, access to new distribution channels, or the opportunity to consolidate operations and cut costs.

Quiz 8: Managing Strategy and Strategic Planning