Question 1

A merger is a transaction involving two or more corporations in which stock is exchanged, but from which only one corporation survives.

Accepted Answer

A) True 
 B)False

Question 2

A corporate strategy that cuts across divisional boundaries to build synergy across business units and to improve the competitive position of one or more business units is called

Accepted Answer

A)   vertical strategy.
B)   horizontal strategy.
C)   hierarchical strategy.
D)   portfolio strategy.
E)   pyramid strategy.F) B) and D)
G) A) and D)

Question 3

According to the BCG Growth Share Matrix, dogs should be either sold off or managed carefully for the small amounts of cash they can generate.

Accepted Answer

A) True 
 B)False

Question 4

According to the BCG Growth Share Matrix, those products with low market share in an unattractive industry that do NOT have the potential to bring in much cash are called

Accepted Answer

A)   cash cows.
B)   lost leaders.
C)   dogs.
D)   question marks.
E)   stars.F) A) and E)
G) B) and E)

Question 5

Which one of the following is NOT a characteristic of a firm that has chosen a captive company strategy?

Accepted Answer

A)   It is most appropriate for a company with a strong competitive position in a growing industry.
B)   The firm reduces its functional activities to reduce costs.
C)   The firm gains a certainty of sales and production in return for becoming heavily dependent upon another firm for at least 75% of its sales.
D)   One of its customers makes up a large percentage of the company's sales and wants the company to keep operating as its supplier.
E)   Management desperately seeks an "angel" to guarantee the company's continued existence.F) A) and B)
G) D) and E)

Question 6

According to the BCG Growth Share Matrix, cash cows are market share leaders typically at the growth stage of their product life cycle and are usually able to generate enough cash to maintain their high share of the market.

Accepted Answer

A) True 
 B)False

Question 7

The most logical growth strategy for a corporation with current product lines with real growth potential in a growing industry is

Accepted Answer

A)   concentration.
B)   conglomerate integration.
C)   concentric diversification.
D)   stability.
E)   retrenchment.F) A) and C)
G) B) and E)

Question 8

Stability strategies can be very useful in the short run, but they can be dangerous if followed for too long.

Accepted Answer

A) True 
 B)False

Question 9

The purpose of vertical growth is to

Accepted Answer

A)   take over a function previously supplied by a former employer.
B)   take over a function previously provided by a supplier or by a distributor.
C)   acquire a company of similar objective.
D)   sell a company encumbered with debt.
E)   expand to countries with strong trade alliances.F) A) and E)
G) B) and D)

Question 10

According to the text, 75% of a company's market value is derived from its

Accepted Answer

A)   employees.
B)   intangible assets.
C)   plant assets.
D)   joint ventures.
E)   licensing agreements.F) C) and D)
G) B) and C)

Question 11

Which strategy is most appropriate as a temporary strategy to enable a corporation to consolidate its resources after prolonged rapid growth in an industry now facing an uncertain future?

Accepted Answer

A)   horizontal integration strategy
B)   no change strategy
C)   retrenchment strategy
D)   pause/proceed with caution strategy
E)   profit strategyF) All of the above
G) D) and E)

Question 12

Turnkey operations are typically contracts for the construction of operating facilities in exchange for a fee.

Accepted Answer

A) True 
 B)False

Question 13

If a new business is very similar to that of the acquiring firm, it adds little new to the corporation and only marginally improves performance.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is NOT a reason why the growth strategy is so desirable?

Accepted Answer

A)   There are more opportunities for advancement and promotion.
B)   A corporation that experiences successful growth is thought of positively by the marketplace and potential investors.
C)   A large and growth-oriented corporation has more clout and influence.
D)   A growing firm can cover up mistakes and inefficiencies because of the increase in cash flow revenue.
E)   A large and growing firm attracts more acquisition offers.F) B) and E)
G) B) and D)

Question 15

A disadvantage of vertical integration is that it

Accepted Answer

A)   creates exit barriers.
B)   improves coordination of activities.
C)   decreases demand for the firm's products and services.
D)   creates entry barriers.
E)   avoids time consuming tasks.F) A) and D)
G) A) and E)

Question 16

Which of the following is NOT one of the advantages of portfolio analysis?

Accepted Answer

A)   The graphic depiction facilitates communication.
B)   It provides the basis for impartial objectivity from which to make decisions.
C)   It encourages top management to evaluate each of the corporation's businesses individually.
D)   It raises the issue of cash flow availability for use in expansion and growth.
E)   It stimulates the use of externally oriented data to supplement management's judgment.F) A) and B)
G) B) and E)

Question 17

What is portfolio analysis?

Accepted Answer

In portfolio analysis, top management vi...

Question 18

Which of the following is NOT one of the limitations of the BCG Growth Share Matrix?

Accepted Answer

A)   It is too simplistic.
B)   The link between market share and profitability is questionable.
C)   Growth rate is only one aspect of industry attractiveness.
D)   There are too many aspects of overall competitive position included.
E)   Small competitors with fast-growing market share are ignored.F) All of the above
G) A) and C)

Question 19

The stability strategy is appropriate for all of the following circumstances EXCEPT

Accepted Answer

A)   useful in the short-run but can be dangerous if followed too long.
B)   most appropriate for reasonably successful corporations in a reasonably predictable environment.
C)   when a firm is continuing its current activities without a significant change in direction.
D)   appropriate when the industry is in decline.
E)   popular with small business owners who have found a niche and are happy with their success.F) B) and E)
G) All of the above

Question 20

Research comparing concentric with conglomerate diversification concludes that

Accepted Answer

A)   conglomerate diversification is always less profitable than concentric diversification.
B)   concentric diversification is always less profitable than conglomerate diversification.
C)   the relationship between relatedness and performance follows an inverted U-shaped curve.
D)   neither concentric nor conglomerate diversification are ever profitable.
E)   for optimum effectiveness both conglomerate and concentric diversification should be utilized in tandem.F) A) and E)
G) None of the above

Exam 7: Strategy Formulation: Corporate Strategy

The purpose of vertical growth is to

Correct AnswerverifiedShow Answer

Research comparing concentric with conglomerate diversification concludes that

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If a new business is very similar to that of the acquiring firm, it adds little new to the corporation and only marginally improves performance.

Correct AnswerverifiedShow Answer

The most logical growth strategy for a corporation with current product lines with real growth potential in a growing industry is

Correct AnswerverifiedShow Answer

A merger is a transaction involving two or more corporations in which stock is exchanged, but from which only one corporation survives.

Correct AnswerverifiedShow Answer

Which one of the following is NOT a characteristic of a firm that has chosen a captive company strategy?

Correct AnswerverifiedShow Answer

The stability strategy is appropriate for all of the following circumstances EXCEPT

Correct AnswerverifiedShow Answer

According to the BCG Growth Share Matrix, dogs should be either sold off or managed carefully for the small amounts of cash they can generate.

Correct AnswerverifiedShow Answer

A corporate strategy that cuts across divisional boundaries to build synergy across business units and to improve the competitive position of one or more business units is called

Correct AnswerverifiedShow Answer

Turnkey operations are typically contracts for the construction of operating facilities in exchange for a fee.

Correct AnswerverifiedShow Answer

According to the text, 75% of a company's market value is derived from its

Correct AnswerverifiedShow Answer

Which of the following is NOT one of the limitations of the BCG Growth Share Matrix?

Correct AnswerverifiedShow Answer

What is portfolio analysis?

Correct AnswerverifiedIn portfolio analysis, top management vi...View AnswerShow Answer

Which of the following is NOT one of the advantages of portfolio analysis?

Correct AnswerverifiedShow Answer

Which strategy is most appropriate as a temporary strategy to enable a corporation to consolidate its resources after prolonged rapid growth in an industry now facing an uncertain future?

Correct AnswerverifiedShow Answer

Which of the following is NOT a reason why the growth strategy is so desirable?

Correct AnswerverifiedShow Answer

Stability strategies can be very useful in the short run, but they can be dangerous if followed for too long.

Correct AnswerverifiedShow Answer

According to the BCG Growth Share Matrix, cash cows are market share leaders typically at the growth stage of their product life cycle and are usually able to generate enough cash to maintain their high share of the market.

Correct AnswerverifiedShow Answer

A disadvantage of vertical integration is that it

Correct AnswerverifiedShow Answer

According to the BCG Growth Share Matrix, those products with low market share in an unattractive industry that do NOT have the potential to bring in much cash are called

Correct AnswerverifiedShow Answer

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In portfolio analysis, top management vi...
View Answer

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