chapter test 8

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7/6/2014 Chapter Test http://highered.mheducation.com/sites/0078029503/student_view0/chapter8/chapter_test.html 1/2 Chapter Test (See related pages) Results Reporter Out of 10 questions, you answered 10 correctly with a final grade of 100% 10 correct (100%) 0 incorrect (0%) 0 unanswered (0%) Your Results: The correct answer for each question is indicated by a . 1 CORRECT A company becomes a prime candidate for diversifying under the following circumstances _______________________ A) When it spots opportunities for expanding into industries whose technologies and products complement its present business. B) When it has a powerful and well-known brand name that can be transferred to the products of other businesses and thereby used as a lever for driving up the sales and profits of such business. C) When diversifying into additional businesses opens new avenues for reducing costs via cross-business sharing or transfer of competitively valuable resources and capabilities. D) When can leverage its collection of resources and capabilities by expanding into businesses where these resources and capabilities are valuable assets. E) All of these. 2 CORRECT To judge whether a particular diversification move has good potential for building added shareholder value, the move should pass the following tests: A) the attractiveness test, the barrier-to-entry test, and the growth test. B) the strategic fit test, the resource fit test, and the profitability test. C) the barrier-to-entry test, the growth test, and the shareholder value test. D) the attractiveness test, the cost-of-entry test, and the better-off test. E) the resource fit test, the strategic fit test, the profitability test, and the shareholder value test. 3 CORRECT The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves A) evaluating whether the diversification move will produce a 1 + 1 = 3 outcome such that the company's different businesses perform better together than apart and the whole ends up being greater than the sum of the parts. B) assessing whether the diversification move will make the company better off by increasing its resource strengths and competitive capabilities. C) evaluating whether the diversification move will make the company better off by making it less subject to the bargaining power of customers and/or suppliers. D) assessing whether the diversification move will make the company better off by increasing its profit margins and returns on investment. E) All of these. 4 CORRECT Which of the following is not accurate as concerns entering a new business via acquisition, internal start-up, or a joint venture? A) The big dilemma of entering an industry via acquisition of an existing company is whether to pay a premium price for a successful company or to buy a struggling company at a bargain price. B) Acquisition is generally the most profitable way to enter a new industry, tends to be more suitable for an unrelated diversification strategy than a related diversification strategy, and usually requires less capital than entering an industry via internal start-up. C) Acquisition is the most popular means of diversifying into another industry, has the advantage of being quicker than trying to launch a brand-new operation, and offers an effective way to hurdle entry barriers. D) Joint ventures are an attractive way to enter new businesses when the opportunity is too complex, uneconomical, or risky for one company to pursue alone, when the opportunities in a new industry require a broader range of competencies and know-how than a company can marshal on its own, and/or when it aids entry into a foreign market. E) The big drawbacks to entering a new industry via internal start-up include the costs of overcoming entry barriers, building an organization from the ground up, and the extra time it takes to build a strong and profitable competitive position. 5 CORRECT The strategic appeal of related diversification is that A) it allows a firm to reap the competitive advantage benefits of skills transfer, lower costs (due to economies of scope), cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities. B) it is less capital intensive than unrelated diversification because related diversification emphasizes getting into cash cow businesses (as opposed to cash hog businesses). C) it involves diversifying into industries having the same kinds of key success factors. D) it is less risky than unrelated diversification because it avoids the acquisition of cash hog businesses. E) it facilitates the achievement of greater economies of scale since the company only enters those businesses that serve the same types of buyer groups and/or buyer needs. 6 CORRECT Economies of scope A) stem from the cost-saving efficiencies of scattering a company's manufacturing/assembly plants over a wider geographic area. B) have to do with the cost-saving efficiencies of operating across a bigger portion of an industry's total value chain. C) stem from cost-saving strategic fits along the value chains of related multiple businesses. D) refer to the cost-savings that flow from being able to combine the value chains of different businesses into a single value chain. E) are like economies of scale and arise from being able to lower costs via a larger volume operation. Course-wide Content Case Support Case Videos Business Strategy Game GLO-BUS Online Chapter 8 1. Review Key Points PowerPoint Presentations 2. Apply Assurance of Learning ... 3. Test Chapter Test Home > Chapter 8 > Chapter Test

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Answer chapter test 8 - crafting and executing strategy

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Page 1: Chapter Test 8

7/6/2014 Chapter Test

http://highered.mheducation.com/sites/0078029503/student_view0/chapter8/chapter_test.html 1/2

Chapter Test(See related pages)

Results Reporter

Out of 10 questions, you answered 10 correctly with a final grade of 100%

10 correct (100%)

0 incorrect (0%)

0 unanswered (0%)

Your Results:

The correct answer for each question is indicated by a .

1CORRECT

A company becomes a prime candidate for diversifying under the following circumstances _______________________

A) When it spots opportunities for expanding into industries whose technologies and products complement its presentbusiness.

B) When it has a powerful and well-known brand name that can be transferred to the products of other businesses andthereby used as a lever for driving up the sales and profits of such business.

C) When diversifying into additional businesses opens new avenues for reducing costs via cross-business sharing ortransfer of competitively valuable resources and capabilities.

D) When can leverage its collection of resources and capabilities by expanding into businesses where these resourcesand capabilities are valuable assets.

E) All of these.

2CORRECT

To judge whether a particular diversification move has good potential for building added shareholder value, the move shouldpass the following tests:

A) the attractiveness test, the barrier-to-entry test, and the growth test.

B) the strategic fit test, the resource fit test, and the profitability test.

C) the barrier-to-entry test, the growth test, and the shareholder value test.

D) the attractiveness test, the cost-of-entry test, and the better-off test.

E) the resource fit test, the strategic fit test, the profitability test, and the shareholder value test.

3CORRECT

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholdersinvolves

A) evaluating whether the diversification move will produce a 1 + 1 = 3 outcome such that the company's differentbusinesses perform better together than apart and the whole ends up being greater than the sum of the parts.

B) assessing whether the diversification move will make the company better off by increasing its resource strengths andcompetitive capabilities.

C) evaluating whether the diversification move will make the company better off by making it less subject to thebargaining power of customers and/or suppliers.

D) assessing whether the diversification move will make the company better off by increasing its profit margins andreturns on investment.

E) All of these.

4CORRECT

Which of the following is not accurate as concerns entering a new business via acquisition, internal start-up, or a jointventure?

A) The big dilemma of entering an industry via acquisition of an existing company is whether to pay a premium price for asuccessful company or to buy a struggling company at a bargain price.

B) Acquisition is generally the most profitable way to enter a new industry, tends to be more suitable for an unrelateddiversification strategy than a related diversification strategy, and usually requires less capital than entering anindustry via internal start-up.

C) Acquisition is the most popular means of diversifying into another industry, has the advantage of being quicker thantrying to launch a brand-new operation, and offers an effective way to hurdle entry barriers.

D) Joint ventures are an attractive way to enter new businesses when the opportunity is too complex, uneconomical, orrisky for one company to pursue alone, when the opportunities in a new industry require a broader range ofcompetencies and know-how than a company can marshal on its own, and/or when it aids entry into a foreignmarket.

E) The big drawbacks to entering a new industry via internal start-up include the costs of overcoming entry barriers,building an organization from the ground up, and the extra time it takes to build a strong and profitable competitiveposition.

5CORRECT

The strategic appeal of related diversification is that

A) it allows a firm to reap the competitive advantage benefits of skills transfer, lower costs (due to economies of scope),cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitivecapabilities.

B) it is less capital intensive than unrelated diversification because related diversification emphasizes getting into cashcow businesses (as opposed to cash hog businesses).

C) it involves diversifying into industries having the same kinds of key success factors.

D) it is less risky than unrelated diversification because it avoids the acquisition of cash hog businesses.

E) it facilitates the achievement of greater economies of scale since the company only enters those businesses thatserve the same types of buyer groups and/or buyer needs.

6CORRECT

Economies of scope

A) stem from the cost-saving efficiencies of scattering a company's manufacturing/assembly plants over a widergeographic area.

B) have to do with the cost-saving efficiencies of operating across a bigger portion of an industry's total value chain.

C) stem from cost-saving strategic fits along the value chains of related multiple businesses.

D) refer to the cost-savings that flow from being able to combine the value chains of different businesses into a singlevalue chain.

E) are like economies of scale and arise from being able to lower costs via a larger volume operation.

Course-wide ContentCase SupportCase VideosBusiness Strategy GameGLO-BUS Online

Chapter 8

1. ReviewKey PointsPowerPoint Presentations

2. ApplyAssurance of Learning ...

3. TestChapter Test

Home > Chapter 8 > Chapter Test

Page 2: Chapter Test 8

7/6/2014 Chapter Test

http://highered.mheducation.com/sites/0078029503/student_view0/chapter8/chapter_test.html 2/2

7CORRECT

The defining characteristic of unrelated diversification (as opposed to related diversification) is

A) the presence of cross-business resource fit (whereas the defining characteristic of related diversification is thepresence of cross-business strategic fit).

B) that the value chains of different businesses are so dissimilar that no competitively valuable cross-businessrelationships are present (in other words, the value chains of a company's businesses offer no opportunities tobenefit from skills or technology transfer across businesses, economies of scope, cross-business use of a powerfulbrand name, and/or cross-business collaboration in creating stronger competitive capabilities).

C) the presence of cross-business strategic fit (whereas the defining characteristic of related diversification is thepresence of cross-business resource fit).

D) that the company's businesses are in different industries.

E) the presence of cross-business financial fit.

8CORRECT

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

A) determining the strength of the five competitive forces in each industry, calculating the ability of the company toovercome or contend successfully with each force, and obtaining overall measures of the firm's ability to competesuccessfully in each of its industries.

B) determining each industry's average profit margins, calculating how far the firm's profit margins are above/below theindustry averages, and then using these values to draw conclusions about industry attractiveness.

C) rating the attractiveness of each industry's strategic and resource fits, summing the attractiveness scores, anddetermining whether the overall scores for the industries as a group are appealing or not.

D) selecting a set of industry attractiveness measures, weighting the importance of each measure (with the sum of theweights adding to 1.0), rating each industry on each attractiveness measure, multiplying the industry ratings by theassigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overallindustry attractiveness score, and using the overall industry attractiveness scores to evaluate the attractiveness ofall the industries, both individually and as a group.

E) identifying each industry's average price, rating the difficulty of charging an above-average price in each industry, anddeciding whether the company's prospects for being able to charge above-average prices make the industryattractive or unattractive.

9CORRECT

The 9-cell industry attractiveness-competitive strength matrix

A) is a valuable tool for ranking a company's different businesses from best to worst based on strategic fit.

B) shows which of a diversified company's businesses have good/poor resource fit.

C) indicates which businesses have the highest/lowest economies of scale and which have the highest/lowesteconomies of scope.

D) uses quantitative measures of industry attractiveness and competitive strength to plot each business's location onthe matrix—the thesis underlying the matrix is that there are good reasons to concentrate the company's resourceson those businesses having relatively strong competitive positions in industries with relatively high attractivenessand to invest minimally or even divest those businesses with relatively weak competitive positions in industries withrelatively low attractiveness.

E) pinpoints which of a diversified company's businesses are resource-rich cash cows and which are resource-poor cashhogs.

10CORRECT

Once a firm has diversified and established itself in several different businesses, then its main strategic alternatives includeall but which one of the following?

A) Broadening the firm's business scope by diversifying into additional businesses.

B) Shifting from a multi-country to a global strategy.

C) Restructuring the company's business line-up with a combination of divestitures and new acquisitions to put a wholenew face on the company's business makeup.

D) Pursuing multinational diversification and striving to globalize the operations of several of the company's businessunits.

E) Divesting some businesses and retrenching to a narrower base of business operations.

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