Question 1

Which of the following seems to be a major determinant of a new venture's success?
A)Large-scale entry into the target industry designed to build market share,even when such entry involves significant short-term losses
B)Cautious small-scale entry into the target industry so that the company can assess the probable outcome of the venture without losing too much money
C)A low level of integration between the marketing and the research and development functions of the venturing company
D)Supporting many new venture projects in the hope that one will succeed
E)Killing the new venture if it does not show a profit after the end of the third year

Accepted Answer

The answer of Which of the following seems to be...

Question 2

New ventures
A)should be killed if they don't make a profit within three years.
B)are often preferred by technology-based companies.
C)are preferred compared to acquisitions when entry barriers are high.
D)are less risky than acquisitions.
E)are best when the company is entering the industry on a small scale.

Accepted Answer

Technology-based companies often prefer new ventures as they provide opportunities for innovation and growth. These companies typically have a higher risk tolerance and are willing to invest in new ventures that may not make a profit within the first few years. Additionally, new ventures allow these companies to enter new markets and diversify their product offerings.

Question 3

New ventures are likely to be preferred compared to acquisitions when
A)entry barriers are high.
B)exit barriers are high.
C)a company's business model is based on using its technology to innovate new kinds of products for related markets.
D)the company needs more mega-opportunities.
E)the industry is in the mature stage of the industry life cycle.

Accepted Answer

When a company's business model is based on using its technology to innovate new kinds of products for related markets, it is more likely to invest in new ventures rather than acquisitions as it allows them to maintain control over their proprietary technology and bring novel ideas to the market. Entry and exit barriers do not play a significant role in this decision, and the need for mega-opportunities may be better suited for acquisitions. The industry life cycle also does not necessarily impact this decision.

Question 4

Which of the following statements concerning research and development is correct?
A)Exploratory research is more important than development research.
B)Development research is more important than exploratory research.
C)Exploratory research is directed toward commercialization of a new technology.
D)Development research advances basic science.
E)Companies with a strong record of internal new venturing excel at both types of research.

Accepted Answer

Companies with a strong record of internal new venturing excel at both types of research. This means that both exploratory research, which is focused on identifying new opportunities, and development research, which is focused on creating new products or technologies, are important for companies that are successful at internal innovation. Therefore, option E is correct. The other options are incorrect because they either prioritize one type of research over the other or make incorrect statements about their goals or outcomes.

Question 5

An internal new venture is the most appropriate strategic choice when
A)an industry is mature.
B)the firm will enter on a small scale.
C)the firm has competencies that can be leveraged.
D)speed of entry is the most important consideration.
E)there is strong pressure for quick profitability.

Accepted Answer

An internal new venture is the most appropriate strategic choice when the firm has competencies that can be leveraged. This means that the firm already possesses the necessary resources, skills, and knowledge to succeed in the new venture, giving them a competitive advantage.

Question 6

Diversification may dissipate value if it is wrongly based on
A)realizing economies of scope.
B)pooling risks.
C)transferring competencies.
D)acquisitions and restructuring.
E)leveraging existing competencies.

Accepted Answer

The answer of Diversification may dissipate value if it is...

Question 7

A company pursuing a multibusiness model based on diversification may justify this strategy for what reason(s)?
A)Transfer competencies
B)Reserve competencies
C)Resource sharing
D)Product bundling
E)All of these choices

Accepted Answer

A company pursuing a multibusiness model based on diversification may justify this strategy for several reasons, including transferring competencies between business units, reserving competencies for the core business, sharing resources across businesses, and bundling products or services to create synergies and enhance competitiveness. Therefore, all of these choices are valid justifications for pursuing a multibusiness diversification strategy.

Question 8

A company should pursue related diversification instead of unrelated diversification when the company's
A)core skills are applicable to a wide variety of industrial and commercial situations.
B)core skills are highly specialized and have few applications outside the core business.
C)top managers are skilled at acquiring and turning around poorly run enterprises.
D)main objective is to maximize growth.
E)free cash flow is high enough that it has funds available for investment.

Accepted Answer

The answer of A company should pursue related diversification instead...

Question 9

General organizational competencies are found
A)in the skills of a company's top managers and functional experts.
B)at low levels in the organization.
C)among technology professionals.
D)within a company's strategic core.
E)in an organization's tangible resources.

Accepted Answer

General organizational competencies refer to the overall abilities and knowledge possessed by an organization as a whole, including its top managers and functional experts. These competencies are not limited to lower levels of the organization, technology professionals, or tangible resources, but are instead found throughout the strategic core of the organization. Therefore, the best choice is A, as it accurately captures the broad range of competencies present within an organization's leadership and functional areas.

Question 10

Which of the following is not a general organizational competency?
A)Entrepreneurial capabilities
B)Capabilities in organizational design
C)Superior strategic capabilities
D)Product bundling
E)All of these choices

Accepted Answer

Product bundling is not a general organizational competency. While it can be a strategy utilized by some organizations, it is not a fundamental competency that would be necessary for all organizations to possess. The other options are all general competencies that most organizations should strive to have.

Question 11

To be commercially successful,new products must be developed with ____ utmost in mind
A)manufacturing requirements
B)engineering technology
C)customer requirements
D)sales techniques
E)technical requirements

Accepted Answer

Commercial success ultimately depends on meeting the needs and wants of the consumers, making customer requirements the most important factor in product development. While manufacturing requirements, engineering technology, sales techniques, and technical requirements are all important considerations, they are all secondary to the needs of the customer.

Question 12

In which of the following cases are bureaucratic costs likely to be lowest?
A)A vertically integrated company with five divisions that pursues full integration
B)A company with five divisions that pursues related diversification based on economies of scope
C)A company with five divisions that pursues related diversification based on transferring competencies
D)A company with five divisions that pursues unrelated diversification based on acquisitions and restructuring
E)A company with twenty divisions that pursues taper integration

Accepted Answer

The answer of In which of the following cases are...

Question 13

A company should pursue unrelated diversification instead of related diversification when
A)its core skills are highly specialized and have few applications outside its core business.
B)the company's top managers are skilled at acquiring and turning around poorly run enterprises.
C)its core technological skills are applicable to a wide variety of industrial and commercial situations.
D)it wants to maximize growth.
E)the bureaucratic costs of implementation do not exceed the value that can be created by realizing economies of scope.

Accepted Answer

If a company's core skills are highly specialized and have few applications outside its core business, pursuing unrelated diversification would be more feasible and effective than related diversification. This is because related diversification involves leveraging the company's existing skills and resources to expand into related industries, which would not be possible if the company's skills are highly specialized and have limited applications. Pursuing unrelated diversification would allow the company to leverage its financial resources and managerial skills to explore new business opportunities that are not related to its core business.

Question 14

A diversification strategy based on resource sharing
A)entails a company creating value by applying the distinctive competencies it developed in one line of business to another line of business.
B)requires the development of new business-level strategies.
C)can help a company to realize economies of scope.
D)is a valid way of supporting the generic business-level strategy of differentiation.
E)increases the accountability of units.

Accepted Answer

Resource sharing can help a company to realize economies of scope, which refers to the cost savings achieved by sharing resources or activities across related business units or products. This can lead to increased efficiency and profitability. Option A refers to a related diversification strategy, while option D refers to a differentiation strategy. Option B and E are not directly related to resource sharing.

Question 15

Which of the following entry strategies should be used when speed is an important consideration?
A)Internal new venture
B)Acquisition
C)Joint venture
D)Unrelated diversification
E)Related diversification

Accepted Answer

Acquisition is often the quickest entry strategy as it involves purchasing an existing company rather than starting from scratch. This can allow the acquiring company to immediately gain access to new markets, customers, and products/services.

Question 16

In which of the following industry environments are new ventures most likely to be favored over acquisitions as a means of entering a new business area?
A)An embryonic industry
B)An industry in its later stages of growth
C)An industry passing through the shakeout stage
D)A mature industry
E)A declining industry

Accepted Answer

In an embryonic industry, there are few established players and a lot of room for innovation and disruption. Therefore, new ventures are more likely to be favored over acquisitions as a means of entering a new business area. In contrast, in a mature or declining industry, established players have already captured market share and may be better positioned for acquisitions rather than investing in new ventures.

Question 17

If a company is to increase the probability of a new product's commercial success,the company must foster close links between
A)marketing and sales.
B)engineering and advertising.
C)quality assurance and inventory management.
D)research and development (R&D)and marketing.
E)accounting and industrial engineering.

Accepted Answer

Research and development (R&D) is responsible for developing and testing new products, but it is equally important to ensure that these new products are marketable and meet the needs of customers. Therefore, close links between R&D and marketing can help increase the probability of a new product's commercial success by ensuring that the product is well-positioned, well-targeted, and well-promoted in the market.

Question 18

When one or more components of a company's value chain are applicable to a wide variety of industrial and commercial situations,which of the following strategies should a company pursue?
A)Unrelated diversification
B)Related diversification
C)A focus strategy
D)Taper integration
E)Backward integration

Accepted Answer

Related diversification allows the company to leverage its valuable components across different industries and commercial situations while still maintaining some level of synergy and competitive advantage. Unrelated diversification involves entering into unrelated industries, which may dilute the company's core competencies, while a focus strategy would narrow the company's focus and limit its potential for growth. Taper and backward integration are not relevant to the question.

Question 19

Which of the following may be true for a company pursuing a strategy of unrelated diversification rather than a strategy of related diversification?
A)The company does not have to achieve coordination between business units.
B)The company has broad organizational competencies that can be transferred.
C)The company has superior strategic management and organizational design.
D)All of these choices.
E)None of these choices.

Accepted Answer

Unrelated diversification allows a company to operate in various industries without needing to coordinate between business units, and it can leverage broad organizational competencies and superior management skills across different sectors.

Question 20

A strategy based on diversification may fail to add value because companies
A)seek to achieve differentiation instead of low cost.
B)diversify into areas in which they have some knowledge and miss out on profitable opportunities in other areas.
C)make acquisitions rather than develop new technologies on their own.
D)incur bureaucratic costs that exceed the value created by the strategy.
E)seek to achieve cost leadership instead of differentiation.

Accepted Answer

The answer of A strategy based on diversification may fail...

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

Which of the following seems to be a major determinant of a new venture's success?

New ventures

New ventures are likely to be preferred compared to acquisitions when

Which of the following statements concerning research and development is correct?

An internal new venture is the most appropriate strategic choice when

Diversification may dissipate value if it is wrongly based on

A company pursuing a multibusiness model based on diversification may justify this strategy for what reason(s) ?

A company should pursue related diversification instead of unrelated diversification when the company's

General organizational competencies are found

Which of the following is not a general organizational competency?

To be commercially successful,new products must be developed with ____ utmost in mind

In which of the following cases are bureaucratic costs likely to be lowest?

A company should pursue unrelated diversification instead of related diversification when

A diversification strategy based on resource sharing

Which of the following entry strategies should be used when speed is an important consideration?

In which of the following industry environments are new ventures most likely to be favored over acquisitions as a means of entering a new business area?

If a company is to increase the probability of a new product's commercial success,the company must foster close links between

When one or more components of a company's value chain are applicable to a wide variety of industrial and commercial situations,which of the following strategies should a company pursue?

Which of the following may be true for a company pursuing a strategy of unrelated diversification rather than a strategy of related diversification?

A strategy based on diversification may fail to add value because companies