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Exam 6: Corporate-Level Strategy: Creatingvalue Through Diversification

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Question 21

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What are some of the key issues to take into account when considering whether or not to vertically integrate?

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When considering whether or not to verti...

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Question 22

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Portfolio management should be considered as the primary basis for formulating corporate-level strategies.

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Question 23

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An oil refinery secures land leases and develops its own drilling capacity to ensure a constant supply of crude oil.This is an example of forward integration.

Restructuring requires the corporate office to find either poorly performing firms with unrealized potential or firms in industries on the threshold of significant,positive change.

The acquisition of two or more counter-cyclical businesses is an example of using diversification to reduce risk.

Starbucks acquired the baker chain,La Boulange,with the intention of selling the bakery products at its coffee cafes.The increased market exposure for La Boulange is an example of a revenue enhancing benefit that can arise from the differentiation strategy.

One of the criteria for a core competence is that the different businesses in the corporation must be similar in at least one important way related to the core competence.

Economies of scope are cost savings from leveraging core competencies or sharing unrelated activities among businesses in a corporation.

Transaction costs include all of the following costs EXCEPT

Briefly explain the advantages and disadvantages of vertical integration.

Reasons for acquisition failure include: ineffective integration of the acquisition,too high of a premium paid for the common stock of the target company,or inability to understand how the assets of the acquired firm would fit with the lines of business of the existing company.

The term golden parachute refers to _________.

The potential advantages of strategic alliances and joint ventures include entering new markets as well as developing and diffusing new technologies.

Creating value within business units can happen when the corporate office helps subsidiaries make wise choices in their own acquisitions,divestures,and new ventures.This is known as ________.

Internal development may be time consuming and,therefore,firms may forfeit the benefits of speed that growth through __________ and __________ can provide.

The Hewlett-Packard and Autonomy merger in 2011 is an example of a successful merger.

The main reason that automobile manufacturers have increased the amount of outsourced inputs is because of the importance of boom and bust cycles in the industry.

Related diversification enables a firm to benefit from horizontal relationships across different businesses in the diversified corporation by leveraging core competencies and sharing activities.

When management uses common production facilities or purchasing procedures to distribute different but related products,they are ________________.

An antitakeover tactic in which existing shareholders have the option to buy additional shares of stock at a discount to the current market price is called ______.