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Q:
(p. 278) _______ is the process by which corporate executives routinely remap businesses to match rapidly changing market opportunities.
A. Parenting
B. Patching
C. Portfolio matching
D. Environmental strategy
Q:
Mergers and acquisitions designed to create vertical integration should be managed through the M-form structure.
Q:
A thinly traded market is a market where there are only a small number of buyers and sellers, where information about the opportunities in this market is not widely known, and where interests besides purely maximizing the value of a firm can be important.
Q:
(p. 278) The duration of an advantage in patching is:
A. Unpredictable
B. Sustained
C. Short-term
D. Dependent on resources
Q:
When acquiring a publicly traded firm a bidder has to release all the information it has about the potential value of that target in combination with itself.
Q:
(p. 275) The fact that ______ may exist in classifying sources of parenting opportunity is a minor consideration, relative to the value of the parenting framework for strategic analysis in multi-business companies.
A. Overlap or redundancy
B. Turbulent markets
C. Major changes
D. Common capabilities
Q:
(p. 275) Governments, regulators, unions and suppliers represent ________ who potentially could be managed more effectively by the parent, than by the individual business units.
A. Specialized expertise
B. Predictable errors
C. External stakeholders
D. Internal stakeholders
Q:
One of the keys for a bidding firm to earn superior performance in an acquisition strategy is to make sure that multiple bidders are pursuing the same target.
Q:
One of the main reasons why bidding firms do not obtain competitive advantages from acquiring strategically related target firms is that several other bidding firms value the target firm the same way.
Q:
(p. 275) Whether apparent or not, _______ among business units within or outside the parent company may be complex or difficult to establish without parent company help.
A. Capabilities
B. Expertise
C. Sales
D. Linkages
Q:
The difference between the unexpected value of an acquisition actually obtained by a bidder and the price the bidder paid for the acquisition is a profit for the equity holders of the target firm.
Q:
(p. 275) Lengthy product life cycles can lead to over reliance on old products. This is an example of:
A. External relations
B. Linkage
C. Predictable error
D. Specialized expertise
Q:
The market for corporate control is the market that is created when multiple firms actively seek to acquire one or several firms.
Q:
(p. 275) Consider Vepco, a company that began as a rocket propulsion development firm and grew through vertical integration. The firm is trying to figure out how to keep pace with the accelerated trends toward outsourcing that has developed in the last 10 years. Which type of parenting opportunity does this represent?
A. Business definition/redefinition
B. Management
C. Specialized expertise
D. Predictable errors
Q:
Managerial hubris is the well-founded belief held by managers in bidding firms that they can manage the assets of a target firm more efficiently than the target firm's current management.
Q:
(p. 275) Ensuring that certain issues are addressed, objectively assessed and assisting in any resolution may be a parenting opportunity that could add value. These issues--like attracting and keeping people with specialized skills--are:
A. Marketing-based
B. Management-based
C. Age-based
D. Part of the business definition
Q:
(p. 274) The _________ perspective sees multi-business companies as creating value by influencing the businesses they own.
A. Strategic environment
B. Growth-share matrix
C. Patching
D. Parenting
Q:
Free cash flow is simply the amount of cash a firm has to invest after all positive net present-value investments in its ongoing businesses have been funded.
Q:
(p. 274) In the parenting framework, the corporate office of a multibusiness company is the
A. child
B. brother
C. parent
D. sister
Q:
The cumulative abnormal return for a merger or acquisition can be positive or negative depending on whether the stock in question performs better or worse than what was expected without an acquisition.
Q:
(p. 274) Realizing ____ from shared capabilities and core competencies is a key way value is added in multibusiness companies.
A. competencies
B. profits
C. synergies
D. resources
Q:
In mergers and acquisitions, the owners of the bidding firm appropriate the economic value created by the transaction.
Q:
(p. 273) For competitive advantage to be sustainable, any combination of competencies must be:
A. Expensive
B. Easily imitated
C. Unique
D. Sustainable themselves
Q:
Strategy researchers have found that in mergers and acquisitions, the more strategically related bidding and target firms are, the more economic value these mergers and acquisitions create.
Q:
One study that reviewed 40 empirical merger and acquisition studies in the finance literature concluded that acquisitions, on average, increased the market value of bidding firms by about 25 percent and left the market value of the target firms unchanged.
Q:
(p. 273) The least profitable firms are:
A. Broadly diversified firms whose strategies are build around very general resources such as money
B. Ones that involve combining resources into competitive advantage
C. Rigidly specialized in an attractive industry
D. Flexible
Q:
In an initial public offering, a firm (typically working with an investment banker) sells its equity to the public at large.
Q:
(p. 273) Situations that involve _______ occur when no real overlapping capabilities or products exist other than financial resources.
A. Financial diversification
B. Unrelated diversification
C. Related diversification
D. Leveraged businesses
Q:
The existence of strategic relatedness between bidding and target firms is sufficient for the equity holders of bidding firms to earn economic profits from their acquisition strategies.
Q:
(p. 273) _______ is those that rely on the same or similar capabilities to be successful and attain competitive advantage in their respective product markets.
A. Leveraged businesses
B. Networked businesses
C. Related businesses
D. Unrelated businesses
Q:
Firms should pursue merger and acquisition strategies only to obtain valuable economies of scope that outside investors find too costly to create on their own.
Q:
(p. 273) The core competency must represent a major source of value to be a basis for competitive advantage. Furthermore, the core competence:
A. Must be negotiable
B. Must be financial
C. Must be diversified
D. Must be transferable
Q:
If bidding and target firms are strategically related, then the economic value of these two firms combined is greater than their economic value as separate entities.
Q:
(p. 269) The most compelling reason companies should diversify can be found in situations when:
A. Core competencies are not similar
B. Core competencies can be leveraged with other products or into other markets
C. Management is similar in various businesses
D. Cash resources can be leveraged
Q:
To be economically valuable, links between bidding and target firms must meet the same criteria as diversification strategies.
Q:
(p. 271) Which of the following represents an operating opportunity to build value or sharing?
A. Shared inbound or outbound shipping and materials handling
B. Shared management know-how
C. Shared after-sales service
D. Shared brand name
Q:
(p. 270) Enhanced bargaining power with distributors and retailers to gain shelf space, shelf positioning, stronger push, more dealer attention and better profit margins represents which of the following sources of value building in multi-business companies?
A. Market-related opportunities
B. Functional-related opportunities
C. Potential competitive advantage
D. Operating opportunities
Q:
Diversification economies are achieved by the ability of firms to dictate prices by exerting market power.
Q:
(p. 269) The most compelling reason companies should diversify can be found in situations where _______ can be leveraged with other products or into markets that are not a part of where they were created.
A. cash
B. disruptive competencies
C. core competencies
D. finances
Q:
Despite the popularity of conglomerate mergers in the 1960s, most mergers and acquisitions among strategically related firms are divested shortly after they are completed.
Q:
(p. 269) __________ is concerned with whether or not the potential competitive advantages expected to arise from each value opportunity have materialized.
A. Strategic choice
B. Strategic analysis
C. Strategic evaluation
D. Strategic growth
Q:
In a product extension merger, a firm acquires complementary products through merger and acquisition activities.
Q:
(p. 270) Opportunities to build value via diversification, integration or joint venture strategies are usually NOT found in which of the following?
A. Market-related activities
B. Operations-related activities
C. Management activities
D. Non-value chain activities
Q:
According to the Federal Trade Commission, a firm engages in a horizontal merger when it acquires former suppliers or customers.
Q:
(p. 266) The ______ portrays the notion that firms need to be self-sufficient in capital.
A. Environmental approach
B. Parenting approach
C. Portfolio approach
D. Patching approach
Q:
In principle, the Federal Trade Commission will allow any acquisition involving firms with headquarters in the United States that could have the potential for generating monopoly or oligopoly profits in an industry.
Q:
(p. 266) Which of the following is NOT a limitation of the portfolio approaches?
A. Identifying individual businesses or distinct markets was not often as precise as the underlying assumptions required
B. The underlying assumption about the relationship between
C. The approach did not emphasize that market share and profitability are the same across different industries and market segments
D. The portfolio approach limited strategic options, which were seen mostly as basic strategic missions rather than descriptions of the flow of resources in a company
Q:
If there is any hope that mergers and acquisitions will be a source of superior performance for bidding firms, it must be because of some sort of strategic relatedness between bidding and target firms.
Q:
(p. 266) The only relationship between business units with the portfolio matrix is:
A. Creation of competitive advantage
B. Internally synergies
C. Cash
D. Core competencies
Q:
The acquisition of strategically unrelated targets will generate substantial economic profits for both the bidding and the target firms.
Q:
(p. 265) The two dimensions in the BCGs Strategic Environments matrix are ____ and _____ of competitive advantage.
A. length, timing
B. yes and no
C. sources, size
D. many, few
Q:
In all acquisitions bidding, firms will be willing to pay a price for a target up to the value that the firm adds to the bidder once it is acquired.
Q:
(p. 265) Skills in achieving differentiation characterize winners in ________ businesses
A. Volume
B. Stalemate
C. Specialization
D. Fragmented
Q:
The price of each of a firm's shares multiplied by the number of shares outstanding is known as the firm's current market value.
Q:
(p. 265) _________ has many sources of advantage and fined those advantages potentially sizable.
A. Specialization businesses
B. Stalemate businesses
C. Fragmented businesses
D. Volume businesses
Q:
In 2007, the total value of mergers and acquisition deals in the United States was $10 trillion.
Q:
(p. 265) Skills in achieving differentiation in product design, branding expertise, innovation, first-mover and sometimes scale characterize winners in:
A. Stalemate businesses
B. Specialization businesses
C. Volume businesses
D. Fragmented businesses
Q:
In the first 11 months of 2008, there were 9,900 mergers and acquisitions in the United States.
Q:
(p. 265) Which type of business involves differentiated products with low brand loyalty, easily replicated technology and minimal scale economies?
A. Fragmented businesses
B. Specialization businesses
C. Volume businesses
D. Stalemate businesses
Q:
While mergers typically begin as a transaction between equals, that is, between firms of equal size and profitability, they often evolve after a merger such that one firm is more dominant in the management of the merged firm than the other.
Q:
When the assets of two similar-sized firms are combined, this is known as a merger.
Q:
(p. 265) _________ has many sources of advantage. However, these are all small.
A. Stalemate businesses
B. Fragmented businesses
C. Specialization businesses
D. Volume businesses
Q:
In an acquisition a tender offer can only be made with the support of the management of the acquired firm.
Q:
(p. 265) _________ has few sources of advantage, with most of them small. This results in very competitive situations.
A. Fragmented businesses
B. Volume businesses
C. Stalemate businesses
D. Specialization businesses
Q:
A privately held firm has not sold any shares on the public stock market.
Q:
(p. 265) _________ are those that have few sources of advantage, but the size is large--typically the result of scale economies.
A. Volume businesses
B. Stalemate businesses
C. Specialization businesses
D. Fragmented businesses
Q:
When the management of a target firm wants the firm to be acquired, this is known as a hostile takeover.
Q:
(p. 265) Which matrix allows one way for multi-business companies to rationalize what businesses they are in--businesses that share core competencies and associated competitive advantages.
A. Growth-share matrix
B. Portfolio attractiveness matrix
C. Strategic environments matrix
D. Business strength matrix
Q:
(p. 264) Which matrix involves a framework that can help ensure that businesses' strategies are consistent with strategies appropriate to their strategic environment?
A. Strategic choice matrix
B. Growth-share matrix
C. Industry attractiveness-business strength matrix
D. Strategic environments matrix
Q:
For a firm to gain a controlling share in an acquisition, it must purchase more than 51% of the acquired firm's assets.
Q:
A firm engages in an acquisition when it purchases a second firm.
Q:
(p. 263) Which of the following is a factor in the cost position that helps determine business strength?
A. Delivery times
B. Manufacturing flexibility
C. Brand awareness
D. Economies of scale
Q:
What is the connection between strategic alliances and real options?
Q:
(p. 263) Which of the following factors is considered in determining a business's strength for the industry attractiveness-business strength matrix?
A. Threat of substitute products
B. Economic factors
C. Sociopolitical considerations
D. Response time
Q:
Describe five tools that firms can use to reduce the threat of cheating in strategic alliances.
Q:
(p. 263) Which of the following factors is NOT considered in determining industry attractiveness?
A. Nature of competitive rivalry
B. Bargaining power of suppliers/customers
C. Firm's level of differentiation
D. Financial norms
Q:
Discuss to what extent acquisitions can be a substitute for alliances and identify four conditions under which alliances will be preferred to acquisitions.
Q:
(p. 263) The industry attractiveness-business strength matrix improves on the BCG matrix in some fundamental ways. Which of the following is NOT one of these?
A. The terminology associated with the industry attractiveness-business strength matrix is preferable because it is less offensive
B. The terminology associated with the industry attractiveness-business strength matrix can be much more complicated than the BCG matrix
C. The multiple measures associated with each division of the industry attractiveness-business strength matrix tap many factors relevant to business strength and market attractiveness besides market share and market growth
D. There is broader assessment during the planning process of the industry attractiveness-business strength matrix
Q:
Discuss when firms go it alone and identify three conditions under which alliances will be preferred to going it alone and when going it alone is not an attractive substitute for an alliance.
Q:
(p. 262) The ______ decisions of the industry attractiveness-business strength matrix remain quite similar to those of the BCG growth-share matrix.
A. Management approach
B. Resource allocation
C. Business strategy
D. Functional strategy