1. The focused differentiation strategy differs from the differentiation strategy in that:
a. the suppliers component of the Five Forces Model is less important.
b. expansion into global markets requires this strategy because of cultural diversity.
c. the competitive scope changes from an industry-wide model to a narrow industry segment.
d. it is more difficult to establish a leadership position in the industry.
____ 12. The integrated cost leadership/differentiation strategy:
a. is one of the most common successful business strategies.
b. has been shown by research to be consistently correlated with above-average returns.
c. is more risky to implement than the cost-leadership or differentiation business strategies.
d. is a more stable business strategy once the firm is established in a leadership position.
____ 13. Competitive dynamics refers to a series of:
a. competitive actions taken by only one firm in a market.
b. competitive actions taken by the market leader.
c. competitive actions and competitive responses initiated among firms competing within a given market.
d. competitive actions and competitive responses initiated among firms competing within numerous markets.
____ 14. Two companies that share markets, but which have little similarity in their resources are:
a. direct, mutually-acknowledged competitors.
b. neither direct nor mutually-acknowledged competitors.
c. competitors who are probably not engaged in intense rivalry.
d. competitors who have reached mutually-sustainable competitive advantage.
____ 15. Both __________ and __________ affect the awareness and motivation of a firm to undertake actions and responses.
a. first-mover advantages, corporate size
b. market commonality, resource similarity
c. management capabilities, competitive analysis
d. speed of management decisions, management actions
____ 16. In standard cycle markets where the size of the market is very large:
a. competitive rivalry is lessened because there are sufficient consumers for all the major firms to earn at least average returns.
b. the firms have little loyalty to their products.
c. even tiny percentages of market share are the focus of extreme competitive rivalry.
d. economies of scale are less important than product innovations.
____ 17. The ultimate test of the value of a corporate-level strategy is whether the:
a. corporation earns a great deal of money.
b. top management team is satisfied with the corporation’s performance.
c. businesses in the portfolio are worth more under the management of the company in question than they would be under any other ownership.
d. businesses in the portfolio increase the firm’s financial returns.
____ 18. Which acquisition would be considered unrelated?
a. a candy manufacturer purchases a chemical laboratory specializing in food flavorings.
b. a chain of garden centers acquires a landscape architecture firm.
c. a hospital acquires a long-term care nursing home.
d. a white-tablecloth restaurant chain acquires a travel agency.
____ 19. Usually a company is classified as a single business firm when revenues generated by the dominant business are greater than __________ percent.
____ 20. Dragonfly Publishers of children’s books has purchased White Rabbit, another publisher of children’s books. Both companies’ books are sold to the same retail stores and schools. Their content is different, since Dragonfly produces children’s literature, whereas White Rabbit focuses on child-level scientific and nature topics. Dragonfly and White Rabbit will merge their administrative and sales operations, while maintaining separate writing and editorial staffs. Which employees should be LEAST concerned about their future job stability?
a. book sales staff
b. book editors
d. administrative assistants
____ 21. Which type of diversification is most likely to create value through financial economies?
a. related constrained
b. operational and corporate relatedness
d. related linked.
____ 22. Firms with internal capital markets have the following informational advantage(s):
a. sharing information only with stockholders and no other outside stakeholders.
b. sharing only positive information with capital markets.
c. not sharing information about management compensation and providing limited financial information to stakeholders.
d. sharing all information with owners and providing no information to external stakeholders.
____ 23. In the diversified firm, internal capital allocation may provide greater gains relative to external capital market allocation because:
a. internal capital allocation always leads to an optimal level of diversification.
b. the corporate office has superior information about its businesses compared to the information outside investors have about those enterprises.
c. the firms act as a mutual fund when investing internal capital.
d. management maintains control of all invested capital.
____ 24. The 1986 Tax Reform Act led to:
a. a reduction in the level of firm diversification.
b. an increase in acquisitions of related businesses.
c. a decrease in the acquisitions of related businesses.
d. stabilization in corporate-level strategies.
____ 25. Synergy exists when:
a. two units are combined into one.
b. two units create value by utilizing market power in their respective industries.
c. firms utilize constrained related diversification to build an attractive portfolio of businesses.
d. the value created by business units working together exceeds the value the units create when working independently.
____ 26. Intangible resources:
a. include such factors of production as plant and equipment.
b. are more flexible than tangible assets.
c. are less flexible than tangible assets.
d. discourage diversification.
____ 27. Personal motives for managers to seek diversification include a desire to:
a. increase their risk taking level.
b. effectively use corporate resources.
c. provide higher returns to corporate stakeholders.
d. increase their compensation.
____ 28. Researchers have found that shareholders of acquired firms often:
a. earn above-average returns.
b. do not earn above-average returns.
c. earn close to zero as a result of the acquisition.
d. are not affected by the acquisition.
____ 29. Each of the following is a rationale for acquisitions EXCEPT:
a. achieving greater market power.
b. overcoming significant barriers to entry.
c. increasing speed of market entry.
d. positioning the firm for a tactical competitive move.
____ 30. The presence of barriers to entry in a particular market will generally make acquisitions __________ as an entry strategy.
a. less likely
b. more likely