Q&A Hero

Q: A company's strategy needs to be ethical because: A. of the dangers that top management will get embarrassed if the company's unethical behavior is publicly exposed. B. it is good business and in the best interest of shareholders. C. everyone is an ethics watchdog and somebody is sure to blow the whistle on the company's unethical behavior. D. of the inevitable risks of getting caught and prosecuted by governmental authorities if an unethical strategy is used. E. unethical strategies boost long-termism in corporate culture.

Q: When high ethical principles are deeply ingrained in the corporate culture of a company, culture can function as a powerful mechanism for all of the following EXCEPT: A. communicating ethical behavioral norms. B. gaining employee buy-in to the company's moral standards. C. gaining employee buy-in to the company's business principles. D. gaining employee buy-in to the company's corporate values. E. boosting short-termism.

Q: Cultural demands to employ unethical means if circumstances become challenging can prompt: A. otherwise dishonorable people to behave ethically. B. increased observance of ethical strategic actions. C. a moral work climate. D. clever ways to operate outside established policies to boost profits. E. company authorization to observe what's right.

Q: 37.Short-termism is defined as:A. making assessments of the moral character of a company's managers.B. the tendency for managers to focus on immediate performance objectives at the expense of longer-term strategic objectives.C. assessing the costs and damages to the company's reputation as a result of ethical violations.D. weighing the short-term costs of regulatory compliance with the long-term costs of noncompliance.E. assessing the short-term costs of complying with government regulations.

Q: Which of the following activities does NOT reflect short termism? A. Decreasing spending on research and development B. Avoiding stock repurchases made to increase earnings-per-share of a company C. Maintaining and hiring critical employees with compensations tied to annual company earnings D. Taking into consideration all tangible future cash flows over intangible brand value appreciation E. Carrying business operations with existing technologies in all markets to cut costs and increase profits

Q: Which of the following would increase the likelihood of ethical lapses as well as poor long-term company performance? A. Dramatic cuts in research and development expenditures in years when low earnings are reported by the company B. Increases in research and development expenditures in years when low earnings are reported by the company C. Executive commitment to implementing strategic suggestions from the board of directors D. Attracting investors who think the company's industry will grow E. Hiring and maintaining a skilled and diverse workforce

Q: Which of the following factors does NOT necessarily drive unethical managerial behavior? A. The pervasiveness of immoral and amoral businesspeople B. Overzealous pursuit of personal gain, wealth, and other selfish interests C. A company culture that puts the profitability and good business performance ahead of ethical behavior D. Heavy pressures on company managers to meet or beat earnings targets E. Executive compensation independent of company performance

Q: The major drivers of unethical managerial behavior include: A. lack of self-dealing and short termism on the part of top executives of a company. B. heavy pressures on company managers to meet or beat performance targets, and overzealous pursuit of personal gain. C. widespread managerial belief in the ethical relativism school of thinking. D. widespread managerial belief in the ethical universalism school of thinking. E. adherence to a cosmetic code of ethics stemming from a desire to avoid the risk of embarrassment.

Q: Senior executives can ensure compliance with the ethical code of conduct by considering: A. whether the proposed action is fully compliant and in harmony with the code of ethical conduct and whether stakeholders would consider anything ethically objectionable. B. whether the code of conduct is rejected by the market and accepted by employees. C. whether the code of conduct was accepted by rivals. D. whether the creation of the code of conduct should be handled by executives or employees. E. whether to eliminate the need to execute a code of conduct at all.

Q: Which of the following is NOT a key question that senior executives must ask whenever a new strategic initiative is under review? A. Would the potential outcome of the proposed action pose a risk of embarrassment? B. Is what we are proposing to do fully compliant with our code of ethical conduct? C. Is there anything in the proposed action that could be considered ethically objectionable? D. Is it apparent that this proposed action is in harmony with our core values? E. Are any conflicts or concerns evident between the proposed action and our core values?

Q: The litmus test of a company's code of ethics is: A. the degree to which it is connected to a company's statement of core values. B. the extent to which it is embraced in crafting strategy and in the day-to-day operations of the business. C. the extent to which a company's approach to ethical behavior mirrors the ethical principles for society at large. D. based on the rules a company's top management and board of directors make about "what is right" and "what is wrong." E. determined by the ethical behaviors expected of company personnel in the course of doing their jobs.

Q: Within the integrated social contracts approach, we find that a multinational company's code of conduct involves universal norms that must be enforced worldwide and also the inclusion of local moral standards (traditions and cultures) by the host country, thereby allowing for ethical diversity which entails: A. the self-righteous company trying to operate as a standard bearer of morality worldwide. B. the disturbing case where a multinational's ethical conduct is found to be no higher than those local ethical norms, where local ethical norms permit practices generally considered immoral. C. the necessity to activate compromises on what is ethically permissible and what is not. D. much internal conflict because "first-order" ethical norms always take precedence over local "second-order" norms. E. a "no compromise" position in instances involving universally applicable ethical norms on what is ethically permissible and what is not.

Q: The strength of integrated social contracts theory is that it: A. correctly recognizes that all soundly reasoned ethical standards are universal. B. accommodates the best parts of ethical universalism and ethical relativism. C. puts no absolute limits on what actions and behaviors fall inside the boundaries of what is ethically or morally right and which actions/behaviors fall outside. D. recognizes the importance of allowing local ethical norms to always take precedence over universal ethical norms. E. recognizes that individuals and businesses have a basic right to "moral free space" and that it is inappropriate to specify ethically permissible and ethically impermissible actions and behaviors.

Q: Integrated social contracts theory maintains that: A. there is no such thing as "moral free space"all ethical standards are determined by societal norms, and individuals have an implied social contract to live up to these standards. B. few nations or cultures have common moral agreement on what is ethically right and wrong. C. there should be no absolute limits put on what actions and behaviors fall inside the boundaries of what is ethically or morally right and which actions/behaviors fall outside. D. adherence to universal ethical norms always takes precedence over local ethical norms. E. .ethical relativism should always be adhered to before ethical universalism when dealing within boundaries of a country's culture and norms.

Q: Which one of the following is NOT a key element of integrated social contracts theory? A. Universal ethical principles apply in those situations where most all societiesendowed with rationality and moral knowledgehave common moral agreement on what is wrong and thereby put limits on what actions and behaviors fall inside the boundaries of what is right, and which ones fall outside. B. Commonly held views about what is morally right and wrong form a "social contract" (contract with society) that is binding on all individuals, groups, organizations, and businesses in terms of establishing the line between ethical and unethical behaviors. C. Universal ethical principles or norms leave some "moral free space" for the people in a particular country (or local culture or even a company) to make specific interpretations of what other actions may or may not be permissible within the bounds defined by universal ethical principles. D. Universal ethical norms always take precedence over local ethical norms. E. Integrated social contracts theory rejects the slippery slope of ethical relativism and embraces ethical universalism.

Q: Which of the following regarding integrated social contracts theory is NOT true? A. Certain universal ethical principles apply in those situations where all societiesthose endowed with rationality and moral knowledgehave a common moral agreement on what is right and wrong. B. Within the boundaries of a social contract, local cultures or groups can specify what additional actions may or may not be ethically permissible. C. Universal ethical principles or norms leave some "moral free space" for the people in a particular country (or local culture or even a company) to make specific interpretations of what other actions may or may not be permissible within the bounds defined by universal ethical principles. D. Universal ethical norms always take precedence over local ethical norms. E. Local ethical norms always take precedence over universal ethical norms.

Q: According to integrated social contracts theory, the ethical standards a company should try to uphold: A. are governed by the school of ethical universalism. B. are governed both by a limited number of universal ethical principles and the circumstances of local cultures, traditions, and shared values. C. are governed by each country's Code of Required Ethical Conduct, which sets forth that each individual/group/business/organization has a "social contract" to observe the ethical and moral standards that the country has adopted. D. should be determined by the company's moral managers. E. should be absolute and avoid wiggle room according to the circumstances of the situation.

Q: The contention that ethical standards should reflect the collective views of multiple societies in establishing a set of universal ethical principles (that are widely recognized as laying legitimacy to ethical boundaries on actions and behavior in all situations) and in allowing inclusion of a set of prevailing customary actions of local cultures or groups (with their traditions and shared values), that further prescribe to what represents ethically permissible behavior and what does not, constitutes the basic principles of: A. the school of ethical relativism. B. the school of ethical universalism. C. integrated social contracts theory. D. corporate social responsibility. E. the triple bottom line.

Q: Companies that adopt the principle of ethical relativism in providing ethical guidance to company personnel: A. base their standards of what is ethical and what is unethical in the company's home market. B. may quickly find themselves on a slippery slope with no higher order moral compass if they operate in countries where ethical standards vary considerably from country to country. C. have no fair way to judge the ethical correctness of the conduct of company personnel. D. have a one-size-fits-all set of ethical standards. E. end up allowing each company employee to determine what set of ethical standards to observe.

Q: Which of the following is NOT true about why codes of conduct based on ethical relativism are ethically dangerous for multinational companies?A. They create a maze of conflicting ethical standards.B. They justify conflicting ethical standards for operating in different countries.C. They establish little moral basis for establishing ethical standards for a company worldwide.D. They restrict enforcement of ethical standards worldwide.E. They create standards that mostly relate to ethical codes in a company's home market, which might trigger compliance issues in the local market.

Q: According to the ethical relativism school of thinking: A. there can be no one-size-fits-all template (set of authentic ethical norms) against which to gauge the conduct of company personnel, due to cross-cultural differences in ethical standards. B. a company should have a different set of ethical standards for each country in which it operates. C. only respected religious experts can provide companies with a higher order moral compass. D. the best source of ethical standards in each country where the company operates is that country's adopted Code of Required Ethical Conduct. E. since there can be no one-size-fits-all set of authentic ethical norms, it is appropriate for each company to hold company personnel to observing the company's code of ethical conduct.

Q: Multinational companies that forbid the payment of bribes and kickbacks in their codes of ethical conduct and that are serious about enforcing this prohibition: A. are generally advocates of the ethical relativism school of thought. B. are misguided in their efforts because bribes and kickbacks are really no different from tipping for service at restaurants as you pay for a service rendered. C. face a particularly vexing problem of losing business to competitors that have no scruplesan outcome that penalizes ethical companies and company personnel. D. are out-of-step with business reality given that the preponderance of company managers are immoral. E. are in a distinct minority compared to companies that view the payment of bribes and kickbacks as a legitimate or permissible practice.

Q: The degree of cross-country variability in paying bribes and kickbacks to grease business transactions: A. violates ethical principles of right and wrong in all countries. B. is ethically acceptable according to the principle of ethical universalism and ethically unacceptable according to the principle of ethical relativism. C. is acceptable to immoral managers but not to amoral managers. D. is one of the thorniest ethical problems that multinational companies face because paying bribes is normal and customary in some countries and ethically or legally forbidden in others. E. is more acceptable in dealing with a company's suppliers than in dealing with a company's customers.

Q: A belief in ethical relativism leads to the conclusion that: A. since ethical standards are subjective, it is perfectly appropriate for each company to define and implement its own ethical principles of right and wrong as concerns the use of underage labor and the payment of bribes and kickbacks. B. ethical standards are determined objectively (rather than subjectively). C. whether the use of underage labor and the payment of bribes/kickbacks should be deemed ethical or unethical depends on the moral standards, values, and business norms that prevail in particular cultures, societies, countries, or circumstances. D. ethical standards are objective and universalthus whether the use of underage labor and the payment of bribes and kickbacks should be deemed ethical or unethical is definitely not dependent on the moral standards, values, and business norms that prevail in particular cultures, societies, countries, or circumstances. E. standards of right and wrong are governed by what is legal in a given countrythus whether the use of underage labor and the payment of bribes and kickbacks are ethical or unethical is governed by local law.

Q: According to the advocates of ethical relativism: A. if the use of underage labor and/or the payment of bribes/kickbacks are acceptable in a particular culture/society/country, then a case can be made that it is morally correct and ethical for a company to use these practices in conducting its business activities in that culture/society/country. B. each company should have the flexibility to set its own standards for deciding whether the use of underage labor and/or the payment of bribes/kickbacks are ethically acceptable or not. C. if the use of underage labor and/or the payment of bribes/kickbacks are not legal but locally acceptable in a particular country, then it is morally correct and ethical for a company to use these practices in that country. D. each industry should go by standards established by competitors for deciding whether the use of underage labor and/or the payment of bribes/kickbacks are ethically acceptable or not. E. it is very clear that the use of underage labor or the payment of bribes and kickbacks are ethically impermissiblelocal customs, behavioral norms, and traditions absolutely cannot be taken into account.

Q: Which of the following statements about the ethical relativism school of thinking is FALSE? A. In a multinational company, application of ethical relativism equates to multiple sets of ethical standards. B. There are few absolutes when it comes to business ethics and thus few ethical absolutes for consistently judging a company's conduct in various countries and markets. C. When there are cross-country or cross-cultural differences in ethical standards, it is appropriate for ethical standards in a company's home market to take precedence over what the local ethical standards may be. D. A company that adopts the principle of ethical relativism and holds company personnel to local ethical standards necessarily assumes that what prevails as local morality is an adequate guide to ethical behavior. E. According to the ethical relativism school of thinking, a "one-size-fits-all" template for judging the ethical appropriateness of business actions and the behaviors of company personnel does not exist.

Q: If one accepts the tenets of the school of ethical relativism, then which of the following is NOT true? A. There are multiple sets of ethical standards rather than a single universal set. B. At least some ethical standards are governed by local norms, religious doctrines, and social customs rather than by absolute standards of right and wrong. C. What constitutes ethical or unethical behavior on the part of businesses must in some cases be judged in the light of local customs and social mores. D. It is inappropriate to hold businesses accountable for observing a universal set of ethical standards. E. Ethical standards for businesses are established on the basis of conceptions of right and wrong that apply to all businesses.

Q: Which of the following is true of ethical relativism? A. Concepts of ethically right and ethically wrong are relative across countries and cultures but are universal within countries or cultures. B. Individuals and businesses have a basic right to "moral free space" and it is inappropriate to specify ethically permissible and ethically impermissible actions and behaviors. C. There are important occasions when local cultural norms and morality and the circumstances of the situation determine whether certain behaviors are right or wrong, for there are no absolutes when it comes to business ethics. D. Concepts of right and wrong as applied to business situations are always a function of each company's own set of values, beliefs, and ethical convictions (as stated in the company's code of ethical conduct). E. Standards of what is ethically right and ethically wrong as applied to business behavior are determined solely by whatever business norms prevail in a particular company's home country and are applicable to its operations in all other countries.

Q: The school of ethical relativism holds that: A. what constitutes ethical or unethical conduct should be determined by the religious convictions of each society or each culture within a country. B. when there are cross-country or cross-cultural differences in what is deemed ethical or unethical in business situations, it is appropriate for local moral standards to take precedence over what the ethical standards may be elsewhere. C. concepts of right and wrong are always governed by business norms in each country, culture, or society. D. concepts of right and wrong are always a function of each individual's own set of values, beliefs, and ethical convictions. E. concepts of right and wrong as they apply to business behavior are always absolute and usually more stringent than universal ethical principles.

Q: The contention that since there are cross-country or cross-cultural differences in ethical standards, it is appropriate to judge behavior as ethical/unethical in the light of local customs and social mores should take precedence over a single set of ethical standards or what may be applicable in a company's home market: A. defines what is meant by ethical relativism. B. defines what is meant by ethical universalism. C. is the foundation of a social contract. D. is the basis for the theory of ethical variation. E. is the guiding principle for religious and moral standards across countries and cultures.

Q: The strength of the beliefs underlying ethical universalism is that: A. ethical universalism recognizes significant variation in basic moral standards according to local cultural beliefs, local religious beliefs, and social mores. B. ethical standards are objectively determined by religious and moral experts. C. what is deemed right or wrong, fair or unfair, moral or immoral, ethical or unethical is (or should be) grounded in religious doctrine and applied strictly to all business situations. D. it draws upon the collective views of multiple societies and cultures to put some clear boundaries on what constitutes ethical business behavior and what constitutes unethical business behavior no matter what country or culture a company is operating in. E. it leaves room for thinking that concepts of right and wrong can be varying shades of gray.

Q: If one concurs with the school of ethical universalism, then one believes that: A. many basic moral standards travel well across cultures and countries and really do not vary significantly according to local cultural beliefs, social mores, religious convictions, and/or the circumstances of the situation. B. since ethical standards are subjectively determined, each company has a window within which it can define and implement its own ethical principles of right and wrong. C. what is deemed right or wrong, fair or unfair, moral or immoral, ethical or unethical in business situations should be judged in light of local customs and social mores and can legitimately vary from one culture or nation to another. D. each country should have some degree of latitude in setting its own ethical standards for judging the ethical correctness of business actions/behaviors within its borders. E. concepts of right and wrong as they apply to business behavior are purely based on an individual's understanding of ethics and differ from person to person.

Q: Which of the following is true of the school of ethical universalism? A. There are ethical principles that set forth the traits and behaviors considered virtuous and that a good person is supposed to believe in and display. B. They are ethical principles embodied in international law that all societies and countries are obliged practice. C. All societies and countries apply essentially the very same set of universally defined ethical principles of right and wrong in judging the ethical correctness of business behavior. D. It is mandatory that the standards of what's ethical and what's unethical be applied universally to all businesses in all countries irrespective of local business traditions and local business norms. E. The standards of what constitutes ethical and unethical behavior in business situations are partly universal, but in the main are governed by local business norms.

Q: According to the school of ethical universalism:A. concepts of what constitute ethical behavior and unethical behavior are dictated by subjectively provable moral principles but not by objectively provable moral principles.B. concepts of right and wrong are universal within countries/societies but not across countries or cultures.C. concepts of what is ethical and what is unethical are socially determined, leaving room for variation from country to country or circumstance to circumstance.D. to the extent there is common moral agreement about right and wrong actions and behaviors across multiple cultures and countries, there exists a set of universal ethical standards to which all societies and all individuals can be held accountable.E. all societies and countries are obligated to apply universally defined ethical principles of right and wrong as set forth by a global body that formulates the Code of Ethical Behavior for the world.

Q: The school of ethical universalism holds that:A. concepts of right and wrong are not absolute and leave room for deviation from country to country or circumstance to circumstance.B. concepts of right and wrong are universal within countries but not across countries and cultures.C. concepts of right and wrong are governed by the Global Code of Ethical and Social Morality.D. the most fundamental conceptions of right and wrong are universal and apply to members of all societies, all companies, and all businesspeople.E. there are multiple sets of standards concerning what is ethically right or wrong that are universally applicable to citizens of a country.

Q: The contentions that (1) many of the same standards of what's ethical and what's unethical resonate with peoples of most societies regardless of local traditions and cultural norms and (2) to the extent there is common moral agreement about right and wrong actions, common ethical standards can be used to judge the conduct of personnel at companies operating in a variety of country markets and cultural circumstances, are defining beliefs of which of the following? A. The school of ethical relativism but not the school of ethical universalism B. The school of ethical universalism but not the school of ethical relativism C. Integrative social contracts theory but not the school of ethical universalism D. The school of ethical relativism and the school of ethical universalism E. The school of ethical relativismbut not integrative social contracts theory

Q: Although exposing children to hazardous work and long work hours is unquestionably deplorable, which of the following, if true, leads to a moral dilemma?A. Use of adults leads to higher labor costs.B. Children are not as efficient as adults in doing physically demanding work.C. Many child laborers come from poverty-stricken families.D. Banning child labor increases school attendance.E. Working children learn independence.

Q: Ethical principles as they apply to the conduct of personnel and business decisions: A. deal chiefly with standards a company has about what is right and wrong insofar as the conduct of its business is concerned and about what behaviors are expected of company personnel. B. deal chiefly with the behaviors that a company's board of directors expects of all company personnel in both their conduct on the job and off the job. C. involve the rules a company's top management and board of directors make about "what is right" and "what is wrong." D. deal primarily with the company's duty to comply with legal requirements and conform to ethical norms of society, in general. E. are generally less stringent than the ethical principles for society at large because it is well understood that businesses should not be expected to operate any differently than what the law requires of them.

Q: How do ethical principles apply to businesses?A. They chiefly deal with the actions and behaviors required to operate companies in a socially responsible manner.B. They chiefly deal with the rules each company's top management and board of directors make about "what is right" and "what is wrong."C. They are not materially different from ethical principles in general.D. They are generally less stringent than the ethical principles for society at large.E. They are generally more stringent than the ethical principles for society at large.

Q: What does business ethics concern?A. Developing a consensus among companies worldwide as to what ethical principles businesses should be expected to observe in the course of conducting their operationsB. What ethical behaviors are imposed on company personnel by governments in the course of doing their jobsC. The application of general ethical principles to the actions and decisions of companies and the conduct of their personnelD. Developing a special set of ethical standards for different types of businesses to observe in conducting their affairsE. Picking and choosing among the consensus ethical standards of society to arrive at a set of ethical standards that apply directly to operating a business

Q: Under what circumstances might an already diversified company choose to pursue corporate restructuring?

Q: Under what circumstances might a diversified firm choose to divest one of its businesses?

Q: Under what circumstances might an already diversified company choose to enter additional businesses and broaden its diversification base?

Q: Once a company has diversified into a collection of related or unrelated businesses and concludes that some strategy adjustments are needed, what are the four main strategic paths it can employ to improve the performance of its overall business lineup?

Q: Why is it pertinent in evaluating a diversified company's business lineup to rank a diversified company's businesses on the basis of their future performance prospects?

Q: Explain the difference between a cash cow business and a cash hog business.

Q: What are the advantages and benefits of using an industry attractive-business strength matrix to evaluate a diversified company's lineup of businesses?

Q: What is the relevance of quantitatively measuring the competitive strength of each business in a diversified company's business portfolio and determining which business units are strongest and weakest?

Q: What does the industry attractiveness test involve in evaluating a diversified company's business lineup? Why is it relevant?

Q: Identify and briefly describe the six steps involved in evaluating a diversified company's business lineup and diversification strategy.

Q: Discuss the pros and cons of a strategy of unrelated diversification.

Q: What is meant by the term strategic fit? What are the advantages of pursuing strategic fit and matchups in choosing which industries to diversify into?

Q: Which is the better approach to diversificationa strategy of related diversification or a strategy of unrelated diversification? Explain and support your answer.

Q: Carefully explain the difference between and the rationale for selecting a strategy of related diversification and/or a strategy of unrelated diversification

Q: Identify and briefly discuss each of the three options for entering new businesses. What are the driving choice parameters for entry into new businesses and which one is the most popular in the sense of being used most frequently?

Q: Explain the relevance of the following as they relate to building shareholder value via diversification: a. the industry attractiveness test b. the cost-of-entry test c. the better-off test

Q: The attractiveness test is the most important test for determining whether diversification into a new business is likely to result in 1 + 1 = 3 increases in shareholder value (as opposed to simply a 1 + 1 = 2 type of increase). True or false? Justify and explain your answer.

Q: Identify and briefly discuss each of the three tests for determining whether diversification into a new business is likely to build shareholder value.

Q: Briefly discuss when it makes good strategic sense for a company to consider diversification.

Q: Which of the following is NOT a good candidate for divestiture in a corporate restructuring effort? A. Business units that lack strategic fit with the businesses to be retained B. Weak performers C. Businesses in unattractive industries D. Businesses that are cash hogs or that lack other types of resource fit E. Businesses compatible with the company's revised diversification strategy

Q: Conditions that may make corporate restructuring strategies appealing include all of the following EXCEPT: A. ongoing declines in the market shares of one or more major business units that are falling prey to more market-savvy competitors. B. a business lineup that consists of too many slow-growth, declining, low-margin, or competitively weak businesses. C. an excessive debt burden with interest costs that eat deeply into profitability. D. ill-chosen acquisitions that haven't lived up to expectations. E. a business lineup that consists of too many cash cow businesses.

Q: Corporate restructuring strategies: A. involve making major changes in a diversified company's business lineup, divesting some businesses and/or acquiring others, so as to put a whole new face on the company's business lineup. B. entail reducing the scope of diversification to a smaller number of businesses. C. entail selling off marginal businesses to free up resources for redeployment to the remaining businesses. D. focus on crafting initiatives to restore a diversified company's money-losing businesses to profitability. E. focus on broadening the scope of diversification to include a larger number of businesses and boosting the company's growth and profitability.

Q: Strategies to restructure a diversified company's business lineup involve: A. revamping the value chains of each of a diversified company's businesses. B. focusing on restoring the profitability of its money-losing businesses and thereby improving the company's overall profitability. C. revamping the strategies of its different businesses, especially those that are performing poorly. D. divesting low-performing businesses that do not fit and acquiring new ones where opportunities are more promising to put a new face on the company's business makeup. E. broadening the scope of diversification to include a larger number of smaller and more diverse businesses.

Q: When should a business NOT be divested? A. When the business is worth more to another company than to the parent company B. When the business is a cash cow C. When the business provides valuable strategic or resource fits for another company D. When shareholders would be better served if the company sells the business for a generous premium E. When the business lacks the cross-boundary presence of shared values and cultural compatibility

Q: In which of the following instances is retrenching to a narrower diversification base NOT likely to be an attractive or advisable strategy for a diversified company? A. When a diversified company has struggled to make certain businesses attractively profitable B. When a diversified company has too many cash cows C. When one or more businesses are cash hogs with questionable long-term potential D. When businesses in once-attractive industries have badly deteriorated E. When a diversified company has businesses that have little or no strategic or resource fits with the "core" businesses that management wishes to concentrate on

Q: Retrenching to a narrower diversification base can be attractive or advisable EXCEPT when: A. certain businesses have questionable long-term potential. B. a diversified company has businesses that have little or no strategic or resource fits with the "core" businesses that management wishes to concentrate on. C. certain business units are weakly positioned and show poor prospects for providing a good return on investment. D. market conditions in a once-attractive business have badly deteriorated. E. business units are cash cows with promising futures.

Q: When a corporate parent creates an independent company and divests it by distributing to its stockholders new shares in the business, it is called: A. a spinoff. B. a wholly-owned subsidiary. C. a functional divesture. D. fully-diluted stock. E. a restructure.

Q: Retrenching to a narrower diversification base is: A. usually the most attractive long-run strategy for a broadly diversified company confronted with recession, high interest rates, mounting competitive pressures in several of its businesses, and sluggish growth. B. a strategy that allows a diversified firm's energies to be concentrated on building strong positions in a smaller number of businesses rather the stretching its resources and managerial attention too thinly across many businesses. C. an attractive strategy option for revamping a diverse business lineup that lacks strong cross-business financial fit. D. sometimes an attractive option for deepening a diversified company's technological expertise and supporting a faster rate of product innovation. E. a strategy best reserved for companies in poor financial shape.

Q: A company that is already diversified may choose to broaden its business scope by building positions in new related or unrelated businesses because of all of the following EXCEPT: A. it has resources or capabilities that are eminently transferable to other related or complementary businesses. B. the company's growth is sluggish and it wants the sales and profit boost that a new business can provide. C. management wants to lessen the company's vulnerability to seasonal or recessionary influences or to threats from emerging new technologies, legislative regulations, and new product innovations that alter buyer preferences and resource requirements. D. it wants to make new acquisitions to strengthen or complement some of its present businesses, market positioning, and competitive capabilities. E. its top management wants to increase its compensation.

Q: The strategic options to improve a diversified company's overall performance do NOT include which of the following categories of actions? A. Broadening the company's business scope by making new acquisitions in new industries B. Increasing dividend payments to shareholders and/or repurchasing shares of the company's stock C. Restructuring the company's business lineup with a combination of divestitures and acquisitions to put a whole new face on the company's business makeup D. Pursuing multinational diversification and striving to globalize the operations of several of the company's business units E. Divesting weak-performing businesses and retrenching to a narrower base of business operations

Q: Corporate strategy options for already diversified companies include all of the following EXCEPT: A. broadening the company's business scope by making new acquisitions in new industries. B. divesting weak-performing businesses and retrenching to a narrower base of business operations. C. restructuring the company's business lineup with a combination of divestitures and new acquisitions to put a whole new face on the company's business makeup. D. pursuing growth opportunities within the existing business lineup. E. pursuing certain acquisitions even if they have done badly or haven't quite lived up to expectations.

Q: Which of the following is NOT a reasonable option for deploying a diversified company's financial resources? A. Making acquisitions to establish positions in new businesses or to complement existing businesses B. Investing financial resources in cash cow businesses until they show enough strength to generate positive cash flows C. Funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses D. Paying down existing debt, increasing dividends, or repurchasing shares of the company's stock E. Investing in ways to strengthen or grow existing businesses

Q: The options for allocating a diversified company's financial resources include all of the following EXCEPT: A. making acquisitions to establish positions in new businesses or to complement existing businesses. B. investing in ways to strengthen or grow existing businesses. C. funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses. D. paying off existing debt and building cash reserves,. E. .decreasing dividend payments and/or selling shares of stock.

Q: Which of the following is the BEST guideline for deciding what the priorities should be for allocating resources to the various businesses of a diversified company? A. Businesses with high industry attractiveness ratings should be given top priority and those with low industry attractiveness ratings should be given low priority. B. Business subsidiaries with the brightest profit and growth prospects, attractive positions on the nine-cell matrix, and solid strategic and resource fits generally should head the list for corporate resource support. C. The positions of each business in the nine-cell attractiveness-strength matrix should govern resource allocation. D. Businesses with the most strategic and resource fits should be given top priority and those with the fewest strategic and resource fits should be given low priority. E. Businesses with high competitive strength ratings should be given top priority and those with low competitive strength ratings should be given low priority.

Q: Which of the following is NOT part of the task of checking a diversified company's business lineup for adequate resource fit? A. Determining whether the excess cash flows generated by cash cow businesses are sufficient to cover the negative cash flows of its cash hog businesses B. Determining whether recently acquired businesses are acting to strengthen a company's resource base and competitive capabilities or whether they are causing its competitive and managerial resources to be stretched too thinly across its businesses C. Determining whether opportunity exists for achieving 1 + 1 = 2 outcomes D. Determining whether the company has adequate financial strength to fund its different businesses and maintain a healthy credit rating E. Determining whether the corporate parent has or can develop sufficient resource strengths and competitive capabilities to be successful in each of the businesses it has diversified into

Q: The tests of whether a diversified company's businesses exhibit resource fit do NOT include: A. whether the excess cash flows generated by cash cow businesses are sufficient to cover the negative cash flows of its cash hog businesses. B. whether a business adequately contributes to achieving the corporate parent's performance targets. C. whether the company has adequate financial strength to fund its different businesses and maintain a healthy credit rating. D. whether the corporate parent has sufficient cash to fund the needs of its individual businesses and pay dividends to shareholders without having to borrow money. E. whether the corporate parent has or can develop sufficient resource strengths and competitive capabilities to be successful in each of the businesses it has diversified into.

Q: What is the business term given for a company that generates cash flows over and above its internal requirements and can provide the corporate parent with funds for reinvestment? A. Cash hog B. Cash cow C. Cash chest D. Free cash flow E. Cash generator

Q: A portfolio approach to managing a company's financial resource fit is based on: A. diversifying risk across a broad spectrum of businesses. B. the risk/reward concept of financial analysis. C. the fact that different businesses have different cash flow and investment characteristics. D. acknowledging that each business unit has varying degrees of opportunity. E. acknowledging that each business is financially strong.

Q: What is it called when a diversified company can add value by shifting capital from business units generating free cash flow to those needing additional capital to expand and realize their growth potential? A. Internal capital market B. Cash cow benefits C. Economic value added D. Shareholder value added E. Derived valuation

Q: The businesses in a diversified company's lineup exhibit good resource fit when: A. the resource requirements of each business exactly match the resources the company has available. B. individual businesses have matching resource requirements at points along their value chain and add to a company's overall resource strengths and when solid parenting capabilities exist without spreading itself too thin. C. each business generates just enough cash flow annually to fund its own capital requirements and thus does not require cash infusions from the corporate parent. D. each business unit produces sufficient cash flows over and above what is needed to build and maintain the business, thereby providing the parent company with enough cash to pay shareholders a generous and steadily increasing dividend. E. there are enough cash cow businesses to support the capital requirements of the cash hog businesses.