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Exam 6: Corporate-Level Strategy

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Question 81

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Large diversified businesses often face a _______________which results from analysts not knowing how to value a vast array of large businesses with complex financial reports.

A) threat of regulation by the Securities and Exchange Commission
B) high CEO turnover
C) threat of takeover
D) conglomerate discount

E) A) and B)
F) All of the above

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Question 82

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The term "conglomerates" refers to firms using the ____ diversification strategy.

A) unrelated
B) related constrained
C) related linked
D) global

E) C) and D)
F) A) and D)

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Question 83

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Operational relatedness is created by ___________of___________.

Which of the following is TRUE?

Corporate-level strategy is concerned with ____ and how to manage these businesses.

The purchasing of firms in the same industry is called:

In the Opening Case, Foster's Group sought to create ___________between the beer and wine businesses.

Corporate tax laws, rather than tax laws affecting individuals, have had the most impact on the firm's use of free cash flows for investment in acquisitions.

Revenues for United Parcel Service (UPS) are derived from the following business segments: 61 percent from U.S. package delivery operations, 22 percent from international package delivery, and 17 percent from non-packaging operations. The best description of the corporate level strategy of UPS is unrelated diversification.

Firms seeking to create value through corporate relatedness use the related constrained strategy.

One of the challenges facing Foster's Group in the Opening Case were problems in sharing activities between the beer and wine businesses. This is a common risk for firms using the related constrained strategy.

In the chapter Opening Case, the sharing of marketing and distribution in the beer and wine business at Foster's Group was intended to create _______________.

A firm that earns less than 70% of revenue from its dominant business and has direct connections between its businesses is engaging in ____ diversification.

It can be difficult for investors to actually observe the value created by a firm (such as Walt Disney) as it shares activities and transfers core competencies.

Which of the following is NOT a limitation directly relating to vertical integration?

Case Scenario : Jewell Company. Jewell Company (JC) is a $2 billion diversified manufacturer and marketer of simple household items, cookware, and hardware. In the early 1950s, JC's business consisted solely of manufactured curtain rods that were sold through hardware stores and retailers like Sears. Since the 1960s however, the company has diversified extensively through acquisition into such businesses as paintbrushes, writing pens, pots and pans, and hairbrushes. Over 90 percent of its growth can be attributed to these many small acquisitions, whose performance it improved tremendously through aggressive restructuring and its corporate emphasis on cost-cutting and cost controls. While JC's sixteen different lines of business may appear quite different, they all share the common characteristics of being staple manufactured items and sold primarily through volume retail channels like Wal-Mart, Target, and Kmart. Because JC operates each line of business autonomously (separate manufacturing, R&D, and selling responsibilities for each line), it is perhaps best described as pursuing a related linked diversification strategy. The common linkages are both internal (accounting systems, product merchandising skills, and acquisition competency) and external (distribution channel of volume retailers). JC is presently contemplating the acquisition of Plastico, a $3 billion U.S.-based manufacturer of flexible plastic products like trash cans, reheatable and freezable food containers, and a broad range of other plastic storage containers designed for home and office use. While Plastico has been highly innovative (over 80% of its growth has come from internal new product development), it has had difficulty controlling costs and is losing ground against powerful customers like Wal-Mart. JC believes that the market power it wields with retailers like Wal-Mart will help it turn Plastico's prospects around. -(Refer to the above Case Scenario ) What difficulties might you expect JC to encounter related to its acquisition of Plastico?

The _________________diversification strategy creates value in two ways. First, since the core competence has already been developed in one business, the firm does not have to allocate resources to develop it. Second, since the resource is intangible, competitors cannot easily imitate it.

Golden parachutes protect managers from the negative consequences of over-diversifying a firm.

The Mars acquisition of the Wrigley assets was part of its related constrained diversification and added market share to the Mars/Wrigley integrated firm. It allowed Mars to gain _______because it could sell its products above the market level or reduce its costs below the market level.

A significant benefit of an internal capital market is limiting competitors' access to information about the performance of the individual businesses within the corporation.