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Management
Q:
For definitional purposes, mergers and acquisitions are exactly the same thing.
a. True
b. False
Q:
Although the term mergers and acquisitions (M&As) is often used, in reality, acquisitions dominate the scene.
a. True
b. False
Q:
An industry whose products can be easily substituted faces more threats from other firms currently not in the same industry.
a. True
b. False
Q:
High entry barriers often result in green-field entries as opposed to acquisitions.
a. True
b. False
Q:
Porters five forces model can be used in regards to the structural attractiveness of an industry.
a. True
b. False
Q:
Research shows that the linkage between product diversification and firm performance seems to be inverted-U shaped.
a. True
b. False
Q:
When conglomerate units are better off competing as stand-alone entities, we call it diversification premium.
a. True
b. False
Q:
Diversification discount is the situation when unrelated-product diversification enables conglomerate units to beat stand-alone rivals.
a. True
b. False
Q:
Instead of operational synergy, conglomerates focus on financial synergy.
a. True
b. False
Q:
Firms that excel in postacquisition integration tend to possess hard-to-imitate capabilities.
a. True
b. False
Q:
A nondiversified single-business firm faces less risk than a diversified firm.
a. True
b. False
Q:
High entry barriers are a main factor in the decision to avoid diversification.
a. True
b. False
Q:
The most straightforward motivation for a firm to diversify is growth opportunities in an industry.
a. True
b. False
Q:
A superior product-related diversification strategy does not require a centralized and cooperative organizational architecture in order to add value.
a. True
b. False
Q:
Answering why firms choose different diversification strategies does not help answer why firms differ and how they behave.
a. True
b. False
Q:
Interest in conglomerates has declined in emerging economies due to their developed capital markets.
a. True
b. False
Q:
By the 1980s MBC began to decrease.
a. True
b. False
Q:
In the United States between the 1950s and 1970s MEB decreased, resulting in a decreased scope of the firm into conglomeration.
a. True
b. False
Q:
The scope of the firm is thus determined by a comparison between MEB and MBC.
a. True
b. False
Q:
The economic benefits of the last unit of growth (such as the last acquisition) can be defined as MBC.
a. True
b. False
Q:
Porters five forces affect the structural attractiveness of an industry.
a. True
b. False
Q:
Not all product-related diversifiers outperform product-unrelated diversifiers.
a. True
b. False
Q:
Firms that engage in product-related diversification as well as far-flung multinational expansion are following a classic conglomerate strategy.
a. True
b. False
Q:
The mechanisms needed to obtain financial synergy in diversification are the same as those needed to obtain operational synergy.
a. True
b. False
Q:
Operational synergy is a primary goal of product-unrelated diversification.
a. True
b. False
Q:
In diversification, firms benefit from declining unit costs by leveraging product relatedness.
a. True
b. False
Q:
Operational synergy involves economies of scale.
a. True
b. False
Q:
You are the CEO of Mega Global Corporation and you are weighing a number of decisions involving diversification, acquisition, and restructuring. Long ago you were the manager of a mutual fund and you decide to make your decisions using the same approach as you used in managing that fund. How would that affect your decisions and decision process?
Q:
You are the CEO of International Widget and you are contemplating expanding into Lower Slobovia. You have the resources needed to start from scratch in that country but it would be possible to acquire the company that dominates the Lower Slobovian Widget industry. Which do you think would be best: start from scratch or an acquisition?
Q:
Other comments you saw in the blog are less hostile to business. In one, the person was claiming that recent developments in financial markets suggest that it is time to revive the use of conglomerates. Based on what is happening now, do you agree? Why or why not?
Q:
In that same blog another person stated: Decisions about diversification and acquisition are not based on the well-being of the shareholder but instead on the needs of the CEO such as ego and job security. As a result, all such decisions should be submitted to a government agency for approval. Do you agree? Why or why not?
Q:
You recently noticed a comment in a blog which stated: By its very nature, restructuring is a violation of CSR! How do you feel about that?
Q:
What is the difference between strategic fit and organizational fit?
Q:
Describe the four types of firms that come from combining product and geographic diversification. Explain which form is most successful and why.
Q:
You are managing a firm in a developing economy. What advantages might you have in pursuing conglomeration for your firm?
Q:
Describe how a firm goes from a single product to conglomeration and what the primary issues on that journey might be.
Q:
Your manager tells you that your firm is considering several acquisitions. The manager asks you for an assessment of which one might be the best for your firm in the immediate future. Without knowing any details about the acquiring or target firms, provide a general checklist of information your manager will need to make a decision.
Q:
Which of the following is true of relatedness?
a. Measurement of product relatedness is no longer debatable.
b. A product-related firm will be considered related regardless of the measure used.
c. Product-unrelated conglomerates are not linked by institutional relatedness.
d. Relatedness can be a common underlying dominant logic that connects various businesses in a diversified firm.
Q:
To improve the odds for success with its acquisitions, a firm should:
a. Engage its rivals in a bidding war.
b. Look for potential firms with high acquisition premiums.
c. Conduct due diligence concerning strategic and organizational fit.
d. Only acquire after participating in an alliance first.
Q:
Firm A is operating in a sunset industry; what is its most prudent strategic move?
a. Engage in vertical acquisitions.
b. Diversify out of the industry.
c. Acquire its rivals.
d. None of the above.
Q:
Which of the following is the most likely reason Firm A would decide to forgo an acquisition and pursue an alliance instead?
a. It wants learning opportunities without long-term commitment.
b. It wants greater control of day-to-day operations.
c. It wishes to engage in a long-term enduring relationship.
d. It wishes to consolidate market power, reduce risks, and leverage economies of scope.
Q:
In addition to product relatedness as a factor when considering acquisitions, relatedness can come in the form of:
a. Hubris.
b. Dominant logic.
c. Bureaucratic costs.
d. Acquisition premiums.
Q:
Which of the following is TRUE regarding restructuring?
a. The two primary ways of restructuring are downsizing and upsizing.
b. Restructuring (downsizing) is used more often by acquiring firms than by seller firms.
c. Corporate restructuring is the primary tool for reducing firm size and scope.
d. Restructuring is easier in knowledge-intensive firms than capital intensive firms.
Q:
To ensure the success of the M&A, managers need to make sure of all the following EXCEPT:
a. Be willing to walk out when premiums are too high.
b. Engage in adequate due diligence concerning strategic fit.
c. Seek organizational contrast and variety rather than organizational fit.
d. Address the concerns of multiple stakeholders.
Q:
Which of the following is TRUE regarding M&As?
a. As many as 70 percent of M&As reportedly fail.
b. On average, the acquiring firms performance improves after acquisitions.
c. The outstanding success of M&As is due to pre- and postacquisition phases.
d. The only identifiable losers are the shareholders of target (acquired) firms.
Q:
Which of the following managerial motives for conglomerations benefits shareholders?
a. Norms.
b. Reducing managers employment risk.
c. Organizational stability.
d. Pursuing power, prestige, and income.
Q:
Diversification is beneficial for all of the following situations EXCEPT:
a. Risk is spread over several (product or country) markets.
b. Core resources are leveraged.
c. The art of post-acquisition integration has been mastered.
d. Commonly shared industry skills are used.
Q:
Sources of operation synergy:
a. Technologies.
b. Marketing.
c. Manufacturing.
d. All of the above.
e. None of the above.
Q:
Product-related diversification involves all of the following EXCEPT:
a. A single business strategy.
b. Synergy.
c. The emphasis is on economies of scale rather than scope.
d. Increases in competitiveness.
Q:
When a firm experiences a failure to integrate its M&As after the acquisition, it is most likely the result of:
a. An inadequate number of worthy targets.
b. Poor strategic fit.
c. Far-flung conglomerates.
d. Poor organizational fit.
Q:
The manager of Firm X watches the manager of a competing firm (Firm Y) successfully pursue some vertical integration up the supply chain; Firm As manager immediately begins acquiring companies in its supply chain. At first glance, the managers motives appear to be:
a. Synergistic.
b. Risk reducers.
c. Hubris.
d. Self-interest.
Q:
Among the following synergistic motives for M&As, which is a resource-based consideration?
a. Learning and developing new skills.
b. Overcoming entry barriers.
c. Responding to formal institutional constraints.
d. Reducing risk.
Q:
With _________ M&As, Firm A, which is a gas and oil company, acquires a chemical company, a transportation company, and a financial services company.
a. Horizontal.
b. Vertical.
c. Conglomerate.
d. Hostile.
Q:
Cross-border M&As:
a. Are rare.
b. Have increased in the past 20 years.
c. Have decreased in the past 20 years.
d. Consist mainly of mergers rather than acquisitions.
Q:
Which of the following is true of mergers?
a. A new legal entity is established.
b. A target firm becomes a unit of the acquiring firm.
c. Control of assets is turned over from one firm to its partner.
d. Mergers are much more common than acquisitions.
Q:
Corporate scope is shaped by:
a. Industry conditions.
b. Firm capabilities.
c. Institutional constraints.
d. All of the above.
Q:
Which of the following motives for M&A does NOT necessarily increase shareholder value?
a. Synergy.
b. Hubris.
c. Performance.
d. Marginal economic benefits.
Q:
Select the best choice: a company that is engaged in oil production, pipelines and tankers, refining, and gasoline stations has engaged in ______________ expansion.
a. Horizontal
b. Vertical
c. Hostile M&A
d. Friendly M&A
Q:
In reality, the need for flexible diversification strategies is because of the static nature of:
a. Industry dynamics.
b. Resource repertoires.
c. Institutional conditions.
d. None of the above.
Q:
The optimum level for a firms diversification is where:
a. Marginal bureaucratic costs are greater than marginal economic benefit.
b. Marginal economic benefit is less than marginal bureaucratic costs.
c. Total bureaucratic costs equal marginal economic benefits.
d. Marginal bureaucratic costs equal marginal economic benefits.
Q:
Managerial motives for diversification that may advance their personal careers without aligning with the interests of the firm include:
a. Leveraging connections with foreign governments.
b. Reducing managers employment risk.
c. A focus on the core competencies of the firm.
d. Searching for formal marketing-supporting and marketing-opening policy changes.
Q:
To best add value, a product-unrelated diversifier needs to focus on:
a. Economies of scale.
b. Centralization.
c. Financial synergy.
d. Cooperative organizational culture.
Q:
One of the dangers of a centralized structure for a product-unrelated diversified conglomerate is:
a. Information overload.
b. Inability to spread out risk.
c. The opportunity for financial synergy.
d. None of the above.
Q:
To add maximum value, a product-related diversifier needs to:
a. Focus primarily on geographic diversification.
b. Switch to a product-unrelated diversification strategy.
c. Foster a centralized organizational structure with a cooperative culture.
d. None of the above.
Q:
Which of the following statements is TRUE?
a. Diversification creates value in all circumstances.
b. Diversification can create value by leveraging certain core competencies and capabilities.
c. Compared with diversified firms, non-diversified single-business firms are better able to spread risk.
d. Firms that undertake acquisitions have mastered the art of post-acquisition integration.
Q:
Among the industry-based considerations that motivate a firm to diversify is:
a. Substantial growth opportunity in an industry.
b. Decreased bargaining power of buyers and suppliers.
c. Decreased bargaining power of buyers and suppliers.
d. Decreased bargaining power of buyers and suppliers.
Q:
At its core, diversification is essentially driven by all of the following EXCEPT:
a. Economic benefits.
b. MEB.
c. Synergy.
d. Less complicated information systems.
Q:
In general, the costs associated with doing business abroad but maintaining product-related diversification are:
a. Greater than the costs of managing a conglomeration while mostly staying at home.
b. Less than the costs of managing a conglomeration while mostly staying at home.
c. About the same as the costs of managing a conglomeration while mostly staying at home.
d. Greater than the costs for all other combinations of geographic and product scope.
Q:
A classic conglomerate is characterized by:
a. Product-related diversification and limited geographic scope.
b. Product-unrelated diversification and limited geographic scope.
c. Product-unrelated diversification and extensive geographic scope.
d. Product-related diversification and extensive geographic scope.
Q:
In light of the four questions (Why do firms differ? How do firms behave? What determines the scope of the firm? What determines the success and failure of firms around the globe?), how would you use them to understand and formulate a strategy?
Q:
Can national policies that seek to promote the well-being of its citizens by its attempts to maintain competition actually have the opposite effect? Why or why not?
Q:
Describe the four responses given in the text for ways in which small local firms respond to MNE attacks in a given market.
Q:
While you cant talk to your competitors on pricing, you can always wink at them. How do companies wink? And why might it be a good approach?
Q:
In some of the discussions of strategy. It was suggested that a firm might attempt to mislead a rival as to the firms true objective (i.e., feint). Is that unethical? Explain.
Q:
In the interest of maintaining high standards for international trade, the U.S. has at various times attempted to legislate the behavior of U.S. based companies. It has even at times tried to apply U.S. standards to those from other countries. Does this make sense to you?
Q:
Dumping involves selling something below cost. Using what you have learned in accounting or economics (or perhaps by talking to someone familiar with these courses) point out why it might sometimes be difficult to prove that a firm is selling below cost.
Q:
How do resource similarity and market similarity interact to influence the actions of rival firms, and why is awareness of resource similarities important?
Q:
The text points out that modern ideas of strategy, pioneered by Michael Porter, have turned IO economics on its head. Although IO economics attempts to prevent any firm from gaining sustained competitive advantage, the very purpose of strategy is to gain a sustainable advantage. Is that good or bad?
Q:
Briefly explain competitive dynamics and how they relate to strategy as action.
Q:
When considering strategic actions for global competition, the first step for a strategist is to
a. Thoroughly understand the nature of your industry.
b. Strengthen the resources and capabilities that help you compete more effectively.
c. Understand the rules of the game for domestic and international competition.
d. Determine whether collusion or competition is the best course of action.