Question 1

A strategic inflection point is a point where major changes in a firm's competitive environment require a complete change of strategy

Accepted Answer

A strategic inflection point is a moment when a significant change occurs in the competitive market that calls for a complete shift in a firm's strategy. It could be due to technological advancements, a new competitor, or a change in customer preferences. Companies that fail to adapt to such changes risk becoming irrelevant and losing their competitive edge.

Question 2

Evidence that companies make only minor changes in their allocation of capital expenditure among their businesses from year to year supports Oliver Williamson's argument that multidivisional structures (the "M-form")permit more rationale,less politicized decision making at the corporate level.

Accepted Answer

The answer of Evidence that companies make only minor changes...

Question 3

The record of most large,mature corporations in developing new businesses is poor.

Accepted Answer

Many large corporations struggle to develop new businesses due to factors such as bureaucracy, resistance to change, and a focus on maintaining their existing products or services. This has been observed across various industries and regions.

Question 4

If corporate management focuses heavily upon enforcing financial performance targets on its individual businesses,this increases the need for corporate management to guide the strategic plans of the individual businesses.

Accepted Answer

The answer of If corporate management focuses heavily upon enforcing...

Question 5

The concept of "parenting advantage" is best summarized by the following statement:

Accepted Answer

Parenting advantage refers to the advantage that a firm gains when it is a better parent to its businesses than any alternative corporate parent. This means that the primary criterion for a company's continued ownership of a business is its ability to add more value than any alternative corporate parent. Option B captures this concept accurately. Option A is incorrect as it talks about emulating the role of good parents in disciplining children which is not related to corporate parenting. Option C talks about coaching which is only one aspect of corporate parenting and not the primary role. Option D talks about developing successful new businesses which is one of the ways to create value for a multibusiness company but not the only measure of success.

Question 6

Corporate management systems based upon financial targets and budgetary controls tend to work best in multibusiness companies with relatively few,closely-related,technology-intensive businesses

Accepted Answer

Corporate management systems based upon financial targets and budgetary controls tend to work best in single-business companies with less complexity, as they can easily measure and monitor the financial performance. In multibusiness companies with diverse and technology-intensive businesses, other factors like market share, innovation, and product development are equally important, which cannot be just measured in financial terms. Therefore, a more agile and flexible management system is needed, which focuses on achieving strategic objectives rather than just financial targets.

Question 7

A major limitation of the BCG matrix in guiding corporate strategy is:

Accepted Answer

The BCG matrix assumes that a business's market growth and relative market share are indicators of its future profitability. However, this is not always the case, as other factors such as industry competition and changes in consumer preferences can significantly impact a business's profitability. Therefore, relying solely on the BCG matrix to guide corporate strategy can be limiting.

Question 8

The principal merit of the BCG portfolio planning matrix is:

Accepted Answer

The BCG matrix is valued for its simplicity, making it easy for businesses to categorize their products or business units and make strategic decisions based on market growth and market share.

Question 9

As boards of directors have become increasingly preoccupied with compliance issues,they have become less effectives in guiding the strategies of the companies they oversee.

Accepted Answer

The statement suggests that boards of directors' focus on compliance has decreased their effectiveness in guiding companies' strategies.

Question 10

Portfolio planning techniques, (also called portfolio matrixes),contribute to the following corporate management function:

Accepted Answer

Portfolio planning techniques are primarily used to allocate resources among different businesses or units within a company. These techniques help management identify which businesses or products are most profitable or have the greatest potential for growth, and allocate resources accordingly. While these techniques may also contribute to other functions, such as selecting diversification opportunities or formulating competitive strategies, their primary purpose is to support the allocation of resources.

Question 11

The success of Berkshire Hathaway over the past five decades under the leadership of Warren Buffett may be attributed primarily to:

Accepted Answer

Berkshire Hathaway's success can be attributed to Warren Buffett's strategy of acquiring well-managed companies in attractive industries and then using disciplined capital allocation to generate returns for shareholders. While he is known for his ability to guide strategic decisions at subsidiaries, it is the focus on acquiring quality companies that has really driven the company's success. Buffett has also been known to exit poorly performing companies or industries, but this is not the primary driver of the company's success.

Question 12

The development of portfolio planning techniques at the end of the 1960s was initiated by:

Accepted Answer

General Electric is widely credited with developing portfolio planning techniques in the late 1960s, specifically the Growth-Share Matrix (also known as the Boston Consulting Group Matrix) which was designed to help allocate resources across a company's diverse business units. The Rand Corporation, Michael Porter, and Peter Drucker were all influential figures in management theory, but did not play a primary role in the development of portfolio planning techniques.

Question 13

What are the two dimensions of the Ashridge portfolio display?

Accepted Answer

The two dimensions of the Ashridge portfolio display are the parent's potential to create value and the parent's potential to destroy value in a business. This helps in analyzing whether a business should be kept in the portfolio or divested. Option A and B are not the correct dimensions and option D is not a dimension of the portfolio display.

Question 14

The primary purpose of the "Ashridge portfolio display" is to:

Accepted Answer

The "Ashridge portfolio display" is primarily used to evaluate the potential for a corporate parent to add value to its individual businesses by examining the strategic position of each business and identifying areas for improvement or investment. It does not focus on appraising individual business performance or benchmarking businesses in relation to one another, nor is its primary purpose to identify businesses for divestment.

Question 15

The fundamental issue that Implementing corporate strategy addresses is:

Accepted Answer

Implementing corporate strategy addresses the fundamental issue of how a multibusiness company can best create value for its different businesses. This involves effectively managing the portfolio of businesses, deciding where the firm should be competing, and exploiting linkages among the different businesses. However, the primary focus of implementing corporate strategy is optimizing the value created for each individual business within the corporation.

Question 16

By separating their corporate headquarters into a corporate management unit and a shared services organization,large corporations anticipate the following benefits:

Accepted Answer

Separating corporate headquarters into a management unit and a shared services organization can lead to economies of scale and greater responsiveness to user needs by centralizing and streamlining services, which can be more efficiently managed and tailored to the needs of different business units.

Question 17

The axes of the BCG and GE/McKinsey portfolio planning matrices act as proxies for two key strategic variables:

Accepted Answer

The BCG matrix uses market growth and market share as its axes, while the GE/McKinsey matrix uses market attractiveness and competitive advantage as its axes.

Question 18

Mintzberg identified a key rigidity of the multidivisional firm is its tendency to impose standardized management systems across all of its divisions.

Accepted Answer

Mintzberg argued that the standardized management systems imposed by multidivisional firms can create rigidity and hinder flexibility in responding to the diverse needs and challenges of each division.

Question 19

The main purpose of a portfolio planning matrix is to:

Accepted Answer

The main purpose of a portfolio planning matrix is to represent graphically the different businesses in terms of key strategic variables that determine their potential for profit. It helps to assess the company's business portfolio and make decisions about allocating resources and investing in new markets or products. It helps to analyze the relative market position and growth prospects of each business unit and prioritize investments based on their potential for profit.

Question 20

Besides managing the overall corporate portfolio of businesses,corporate management can add value to individual businesses by:

Accepted Answer

Corporate management can add value by managing individual businesses, exploiting linkages between them, and managing change, as these activities help in optimizing the performance and synergy of the portfolio.

Quiz 13: Implementing Corporate Strategy: Managing the Multibusiness Firm