Question 1

What rationales for pursuing unrelated diversification are NOT likely to increase shareholder value?

Accepted Answer

The answer of What rationales for pursuing unrelated diversification are...

Question 2

Which of the following is NOT a major consideration in evaluating the pluses and minuses of a diversified company's strategy?

Accepted Answer

All of the other options are major considerations in evaluating the pluses and minuses of a diversified company's strategy. However, scrutinizing each industry/business to determine where the driving forces are considered strongest/weakest and how many profitable strategic groups the company has diversified into is not a major consideration.

Question 3

A comprehensive evaluation of the group of businesses a company has diversified into involves:

Accepted Answer

To comprehensively evaluate the group of businesses a company has diversified into, all of the listed steps must be taken. The attractiveness and competitiveness of each business unit should be evaluated, as well as the strategic and resource fits among them. The performance prospects of each unit should be ranked to determine the company's priorities in allocating resources. Finally, the results of these evaluations should be used to craft new strategic moves to improve the overall performance of the company. Hence, option E is the correct answer.

Question 4

Which of the following is NOT generally something that ought to be considered in evaluating the attractiveness of a multibusiness (diversified)company's business makeup?

Accepted Answer

The frequency of strategic alliances, outsourcing, and common key success factors are not typically primary considerations in evaluating the attractiveness of a company's business makeup.

Question 5

Which of the following is a diversified business with one major "core" business and a collection of small related or unrelated businesses?

Accepted Answer

The answer of Which of the following is a diversified...

Question 6

In companies pursuing a strategy of unrelated diversification:

Accepted Answer

In companies pursuing a strategy of unrelated diversification, each business is on its own in trying to build a competitive edge, and the consolidated performance of the businesses is likely to be no better than the sum of what the individual businesses could achieve if they were independent. There is no synergy expected, and each business is operating independently.

Question 7

Calculating quantitative attractiveness ratings for the industries a company has diversified into involves:

Accepted Answer

The answer choice C describes the correct process for calculating quantitative attractiveness ratings for the industries a company has diversified into. It involves selecting a set of industry attractiveness measures, rating each industry on each measure, weighting the importance of each measure, and obtaining a weighted rating for each industry. The overall industry attractiveness scores are then used to interpret the attractiveness of all the industries, both individually and as a group. This approach allows for a comprehensive evaluation of the company's diversification strategy and helps to identify the most attractive industries for investment.

Question 8

There is ample room for companies to customize their diversification strategies and be defined as being either narrowly or broadly diversified,and when combination related-unrelated diversification strategy options are adopted,they have particular appeal to:

Accepted Answer

Companies with a mix of valuable competitive assets, covering both generalized and specialized resources and capabilities, can effectively implement combination related-unrelated diversification strategies.

Question 9

In judging the attractiveness of the industry that a multibusiness company has diversified into,it is important to:

Accepted Answer

All of these options are important considerations in judging the attractiveness of the industry that a multibusiness company has diversified into. It is crucial to analyze whether each industry represents a good market, calculate industry attractiveness scores, consider the group of industries as a whole, and assess the potential for growth and profitability. All of these factors combined will provide a comprehensive evaluation of the attractiveness of the industry.

Question 10

When identifying a diversified company's present corporate strategy,which of the following would NOT be something to look for?

Accepted Answer

Substituting global strategies for multi-country strategies is more about operational strategy within existing businesses rather than identifying the overall corporate strategy of diversification.

Question 11

Which one of the following is NOT a procedure for evaluating the pluses and minuses of a diversified company's strategy?

Accepted Answer

Option E is not a procedure for evaluating the pluses and minuses of a diversified company's strategy. The other options (A, B, C, D) are all procedures for evaluating a diversified company's strategy.

Question 12

Because unrelated diversification strategies at their best have only limited potential for creating long-term economic value for shareholders,it is essential that management:

Accepted Answer

Since unrelated diversification has limited potential for creating long-term value, it is important for management to not compound the problem by taking a misguided approach. Instead, they should carefully evaluate the potential benefits and risks before pursuing such a strategy.

Question 13

Which of the following is NOT among the disadvantages and managerial problems encountered by companies pursuing unrelated diversification strategies?

Accepted Answer

The potential for having too many cash hog businesses is not mentioned as one of the disadvantages or managerial problems encountered in pursuing unrelated diversification strategies.

Question 14

For an unrelated diversification strategy to produce financial results above that of stand-alone entities,executives must:

Accepted Answer

Executives must satisfy all three tests (attractiveness, cost-of-entry, and better-off) to produce financial results above that of stand-alone entities. They must diversify into businesses that can consistently produce good earnings and returns on investment (attractiveness test), negotiate favorable acquisition prices (cost-of-entry test), and do a superior job of corporate parenting by overseeing high-level managerial oversight, resource sharing, financial resource allocation, and portfolio management or restructuring underperforming businesses (better-off test). Therefore, all the options mentioned in the question are equally important for the success of the diversification strategy.

Question 15

Which one of the following is NOT an important aspect of evaluating the merits of a diversified company's strategy?

Accepted Answer

While determining which business units are cash cows and which ones are cash hogs is a consideration in evaluating a diversified company's strategy, it is not the most important aspect. The other options listed (assessing competitive strength, evaluating strategic fits and resource fits, assessing industry attractiveness, ranking performance prospects) are all critical components of evaluating the merits of a diversified company's strategy.

Question 16

To identify a diversified company's strategy,one should consider such factors as:

Accepted Answer

A is the best choice because it covers the key factors for identifying a diversified company's strategy, including the extent of diversification, related or unrelated diversification, recent moves for divesting, acquiring, and strengthening positions in businesses. B, C, D, and E are also important factors but don't cover the overall diversification strategy of the company.

Question 17

Evaluating a diversified company's corporate strategy and critiquing the pluses and minuses of its business lineup involves

Accepted Answer

Evaluating a diversified company's corporate strategy involves assessing the strategic and resource fits among its various businesses and prioritizing resource allocation to optimize overall performance.

Question 18

As a rule,the key indicators of industry attractiveness,for all the industries represented in a diversified company's business portfolio,should NOT be judged on such attractiveness factors as:

Accepted Answer

The answer of As a rule,the key indicators of industry...

Question 19

Assessments of the long-term attractiveness of each industry represented in a diversified company's lineup of businesses should be based on:

Accepted Answer

Quantitative industry attractiveness scores are the most comprehensive way to assess the long-term attractiveness of each industry, as they consider multiple factors that determine industry attractiveness and weight them according to their relative importance. A value chain analysis (A) may be useful for understanding the dynamics within a particular industry, but it does not provide a comprehensive assessment of industry attractiveness. The fact that companies within an industry are making money or losing money (C) is not a reliable indicator of industry attractiveness, as profitability can vary widely even within an attractive industry. The driving forces within an industry (B) may be important to consider, but they do not provide a complete picture of industry attractiveness. Assessing the competitive advantage potential of each industry (E) is also important, but it is only one of many factors that should be considered when evaluating industry attractiveness.

Question 20

The two biggest drawbacks or disadvantages of unrelated diversification are:

Accepted Answer

Unrelated diversification poses difficulties in managing many different businesses and lacks the added source of competitive advantage that cross-business strategic fit provides.

Quiz 8: Corporate Strategy: Diversification and the Multibusiness Company