Question 1

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 a low-cost position instead of differentiation.

Accepted Answer

Diversification can bring additional bureaucratic costs, such as increased complexity, difficulty in coordination, and the need for additional management layers. These costs can outweigh the potential benefits of diversification, leading to a failure to add value.

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 more attractive 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 because they can develop innovative products and services, and have the potential for high growth and profitability in the long-term. These companies also have the resources and capabilities to invest in and support new ventures. Therefore, option B is the best choice. Options A, C, D, and E are not correct because they are either too limiting or not universally applicable.

Question 3

The greater the number of business units in a company's portfolio,the ____ it is for corporate managers to understand the complexities of each business.
A)easier
B)more difficult
C)less important
D)less expensive
E)more meaningless

Accepted Answer

The statement suggests that as the number of business units increases, it becomes more difficult for corporate managers to understand the complexities of each business. Therefore, option B, "more difficult", is the best choice.

Question 4

In which of the following industry environments are acquisitions most likely to be favored over new ventures?
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

The answer of In which of the following industry environments...

Question 5

What is the process of transferring resources to and creating a new business unit in a new industry called?
A)External new venturing
B)Exportation of resources
C)Intrapreneuring
D)Risk avoidance
E)Internal new venturing

Accepted Answer

The process of transferring resources to and creating a new business unit in a new industry is called internal new venturing. This involves utilizing the resources and knowledge of an existing organization to create a new business unit within the same company, but in a different industry. This strategy allows the company to leverage its existing assets and capabilities while expanding into new markets.

Question 6

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 apply the components of its value chain to a variety of industries or markets, while still maintaining some level of synergy and leveraging existing capabilities. Unrelated diversification involves entering completely unrelated industries, which may not make use of the company's value chain. A focus strategy involves targeting a narrow segment of the market. Taper integration involves owning some but not all components of the value chain, while backward integration involves owning suppliers. None of these strategies are as suitable as related diversification for a company whose value chain components are applicable to a wide variety of situations.

Question 7

Which of the following seems to be a major determinant of a new venture's success?
A)Large-scale entry into the target industry is designed to build market share, even when entry involves significant short-term losses
B)Cautious small-scale entry into the target industry is used 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 8

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

When a company's core skills are highly specialized and have few applications outside its core business, it is more beneficial for the company to pursue unrelated diversification. In this way, the company can leverage its financial resources, managerial expertise, and existing distribution channels to tap into diverse industries without hampering its core business. Pursuing related diversification in such cases might hinder the company's growth potential and profitability.

Question 9

A company considering entering an industry that is in the mature stage of its life cycle would generally prefer which of the following entry strategies?
A)Joint ventures
B)New ventures
C)Acquisitions
D)Long-term contracting
E)Taper integration

Accepted Answer

Acquiring an existing company in the mature industry can provide the entrant with an established market position and customer base, as well as access to established distribution channels and supply chains. This strategy offers a quicker route to market entry and growth without the need for significant investments in building new capabilities from scratch.

Question 10

The three main types of diversification strategies are:
A)acquisitions, joint ventures, and divestments.
B)acquisitions, mergers, and buy outs.
C)acquisitions, internal new ventures, and joint ventures.
D)related acquisitions, unrelated acquisitions, and mergers.
E)joint ventures, strategic alliances, and long-term contracts.

Accepted Answer

Diversification strategies involve a company expanding into new areas or industries. Acquisitions, internal new ventures, and joint ventures are three main types of strategies used for diversification. Acquisitions involve buying another company, internal new ventures refer to starting a new business within the company, and joint ventures involve partnering with another company to pursue new opportunities.

Question 11

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

Accepted Answer

Diversification should not be used as a way to rescue a failing core business. This can result in the dissipation of value as resources are spread too thin, and the company may not have the necessary expertise or resources to succeed in a new market. It is important for diversification to be based on leveraging existing competencies or transferring competencies to new markets in order to create synergies and realize economies of scale or scope. Acquisitions and restructuring can also be effective if they are part of a strategic plan for diversification.

Question 12

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

Accepted Answer

Customer requirements should be the primary focus in developing new products in order to ensure commercial success. It's important to understand and meet customer needs and preferences to create a product that addresses a specific problem, offers a unique solution, or provides a better experience than existing options. While factors like manufacturing, engineering, sales, and technical requirements may also influence product development, customer requirements should take priority.

Question 13

New ventures are a more attractive strategy than 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)it needs to move fast to establish a presence in an industry, commonly an embryonic or growth industry.
E)the company must make the huge investment necessary to develop the set of value-chain activities required to make and sell products in the new industry.

Accepted Answer

The answer of New ventures are a more attractive strategy...

Question 14

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 its growth.
E)free cash flow is high enough that it has funds available for investment.

Accepted Answer

Pursuing related diversification allows a company to leverage its existing core skills and knowledge to enter new industries and markets that are similar or related to its current business. This reduces the risk of failure and increases the potential for success. If a company's core skills are applicable to a wide variety of industrial and commercial situations, it is better suited for related diversification rather than unrelated diversification.

Question 15

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 16

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 most appropriate when the firm has competencies that can be leveraged. This means that the firm has existing capabilities and resources that can potentially lead to success in the new venture. This can provide a competitive advantage and increase the likelihood of success.

Question 17

Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue?
A)Steady industry conditions
B)Varying firm-specific conditions
C)Diversification for pooling risks
D)Decreasing bureaucratic costs
E)Greater differentiation of products

Accepted Answer

The answer of Which of the following reasons can make...

Question 18

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)Exploratory research and development research are needed for internal new venturing.

Accepted Answer

Both exploratory research and development research are important for internal new venturing, as exploratory research explores new ideas and technologies while development research turns those ideas into practical applications. Therefore, both types of research are necessary for a company to innovate and stay competitive.

Question 19

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 fastest way to enter a new market or industry because it allows a company to quickly gain access to new products, services, or market share by purchasing an existing company.

Question 20

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) and marketing must work closely together to ensure that the new product meets the needs of the target market and is effectively promoted to potential customers. This collaboration can lead to a better understanding of customer needs, improved product design and features, and a more effective marketing strategy.

Quiz 10: Corporate Level Strategy: Related and Unrelated Diversification

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

New ventures:

The greater the number of business units in a company's portfolio,the ____ it is for corporate managers to understand the complexities of each business.

In which of the following industry environments are acquisitions most likely to be favored over new ventures?

What is the process of transferring resources to and creating a new business unit in a new industry called?

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

A company should pursue unrelated diversification instead of related diversification when:

A company considering entering an industry that is in the mature stage of its life cycle would generally prefer which of the following entry strategies?

The three main types of diversification strategies are:

Diversification may dissipate value if it is wrongly based on:

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

New ventures are a more attractive strategy than acquisitions when:

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

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

An internal new venture is the most appropriate strategic choice when:

Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue?

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

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

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