Quiz 7 | Chapter 6
When a firm diversifies into related businesses, the primary benefits come from what are known as ______relationships; that is, businesses sharing intangible and tangible resources.→ / horizontal
vertical
hierarchical
reciprocal
Learning Objective: 06-02
A firm may diversify into related businesses. Here, the primary potential benefits to be derived come from horizontal relationships; that is, businesses sharing intangible resources (e.g., core competencies such as marketing) and tangible resources (e.g., production facilities, distribution channels).
If a sporting goods store with several locations acquires another retail store that carries different product lines, it is able to leverage many of its key resources that result in cost savings overall. Thus, the firm benefits from:
unrelated diversification.
→ / economies of scope.
economies of scale.
unrelated competencies.
Learning Objective: 06-03
Economies of scope refers to cost savings from leveraging core competencies or sharing related activities among businesses in the corporation. For example, a sporting goods store with one or several locations may acquire retail stores carrying other product lines. This enables it to leverage, or reuse, many of its key resources (favorable reputation, expert staff and management skills, efficient purchasing operations) the basis of its competitive advantage(s), over a larger number of stores.
Sharp Corporation, the consumer electronics giant, has a set of specialized ______in optoelectronics technologies that are difficult to replicate and contribute to its competitive advantages in its core businesses.
economies of scope
unrelated advantages
→ / core competencies
parenting advantages
Learning Objective: 06-03
Sharp Corporation has a set of specialized core competencies in optoelectronics technologies that are difficult to replicate and contribute to its competitive advantages in its core businesses. Its most successful technology has been liquid crystal displays (LCDs) that are critical components in nearly all of Sharp's products. Its expertise in this technology enabled Sharp to succeed in videocassette recorders (VCRs) with its innovative LCD viewfinder and led to the creation of its Wizard, a personal electronic organizer.
Unrelated diversification can result in a "parenting advantage" for a business new to the firm's portfolio. This advantage is the result of:
substantial changes in the capital structure and assets for the new business.
synergies across business units.
putting in a new management team for the new business.
→ / management expertise and support from the corporate office.
Learning Objective: 06-04
The parenting advantage is defined as the positive contributions of the corporate office to a new business as a result of expertise and support provided and not as a result of substantial changes in assets, capital structure, or management.
The key purpose of portfolio models is to assist a firm in:
identifying activities that can become synergistic across business units.
→ / achieving a balanced mix of businesses that are complementary to one another.
choosing a selection of offerings that will make it an attractive target for acquisition.
determining which factors are most important to sales and market share growth.
Learning Objective: 06-04
The key purpose of portfolio models is to assist a firm in achieving a balanced portfolio of businesses. This consists of businesses whose profitability, growth, and cash flow characteristics complement each other and add up to a satisfactory overall corporate performance.
Based on the BCG Porfolio Matrix, managers of cash cow businesses should be rewarded more on the basis of ______, while managers of star businesses would have high standards for ______.
→ / cash that their businesses generate; revenue growth
revenues; innovation
market share growth; innovation
innovation; revenue growth
Learning Objective: 06-04
Managers of cash cows would have higher threshold levels of profit targets on proposed projects than the managers of star businesses, and would be rewarded more on the basis of cash that their businesses generate. Similarly, managers of star businesses would be held to higher standards for revenue growth than managers of cash cow businesses.
Which of the following is NOT an advantage of mergers and acquisitions?
Refer To: Exhibit 6.9
obtaining valuable resources to help expand product offerings
entering new market segments
→ / increasing size in an inexpensive manner
building market power
Learning Objective: 06-05
According to Exhibit 6.9, mergers and acquisitions allow a firm to: obtain valuable resources that can help an organization expand its product offerings, provide the opportunity for firms to attain three bases of synergy (leveraging core competencies, sharing activities, and building market power), create consolidation within an industry and force other players to merge, and enter new market segments.
Which of the following is (are) important in managing strategic alliances?
→ / trusting the partner and considering the human factor
relying primarily on a contract to make the strategic alliance work
shortchanging the partner
finding a partner with identical strengths
Learning Objective: 06-05
Without the proper partner, a firm should not consider undertaking an alliance. Each partner should bring the desired complementary strengths to the partnership. The goal must be to develop synergies between partner contributions, resulting in a win-win situation. Partners must be compatible and willing to trust each other. Often little attention is given to nurturing the close working relationships and interpersonal connections that unite the partnering organizations.
Why did Southwest decide to acquire AirTran?
AirTran was founded by a friend of Southwest founder Herb Kelleher.
AirTran was searching for a buyer, and Southwest became the obvious choice since all other airlines were losing money.
AirTran was posing a serious competitive threat to Southwest.
→ / There was little room for organic growth, and AirTran had access to some key airports.
None of these.
Despite the fact that employees were the most important stakeholder group in Southwest, they were not paid higher salaries. How were they compensated?
Flexible work schedules and a low-strew work environment were what kept Southwest Employees happy at their workplace.
→ / Stock options were made widely available so all employees could share in the financial success of Southwest.
Comedy and humor were used to keep all employees happy.
In lieu of cash, hefty cash bonuses were offered to all employees.
None of these.