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WorksheetsStrategic Management - Exam 3
Total questions: 39
Worksheet time: 22mins
A computer manufacturer opens retail stores to sell its computers. The manufacturer was previously selling them to distributors. This decision is a example of
Forward Vertical Integration
Backward vertical integration
Forward horizontal integration
backward horizontal integration
A smartphone manufactor decides to start manufacturing its own screens. The manufactur was previously buying them from a supplier. This decision is an example of
forward vertical integration
backward vertical integration.
forward horizontal integration
backward horizontal integration.
Why do companies exist
create profits
satisfy a need
transaction cost of using the market
An airline decides to ally with another airline which has a complementary geographic footprint, this decision is an example of
backward vertical integration.
forward horizontal integration
None of the above
forward vertical integration
Vertical integration is a type of
business strategy
new strategy
positive strategy
corporate strategy
The opposition action of vertical integration is
International diversification
outsourcing
alliancing
acquiring
According to Brian Silverman, a key assumption underlying the theory of vertical integration is
bounded rationality
suppliers and buyers have the same size
suppliers and buyers are located in the same country
firms are boundryless
According to Brain Silverman, a key dimension of transactions in the theory of vertical integration is
industry
country
frequency
firms size
Is it a good idea for an employee to invest in gaining knowledge about a firms unique business processes?
yes
no
some empirical evidence shows that on average
corporate diversification leads to random performance
corporate diversification leads to superior performance
corporate diversification leads to inferior performance(or at best has a neutral impact)
corporate diversification leads initially to inferior performance and subsequently to superior performance.
Company A, which produces oil and is flushed with cash, announces the acquisition of breweries. The top management of Company A argues that, because revenues in both industries exhibit a negative correlation, such move helps the company lower risk. Is this argued benefit likely to produce significant value for the company?
yes
no
When a firm operates in multiple industries simultanously, it is said to be implementing a
Geographic market diversification strategy
product differentiation strategy
geographic market differentiation strategy
product diversification strategy
Firms pursuing _______ have between 70% and 95% of their sales in a single product market.
related constrained diversification
dominant business diversification.
related linked diversification
single business diversification
A firm is owned by members of a single family. Most of the wealth of this family is derived from the operations of this firm, and the family does not want to "go public" with the firm by selling its equity position to outside investors. Will this firm pursue a
strategy?
Highly related diversification strategy
Highly unrelated diversification
Both are correct, depends on the risk profile of the family.
Neither are correct
corporate strategy - in what business should the firm operate?
An understanding of diversification helps managers answer that question.
Two Criteria- 1. Corporation adds value to a business
The corporation has to own the business in order to add/appropriate the value. (markets or alliances do not work)
h
j
j
what does an Alliance do?
improve current operations
economies of scale
learning
all of these are correct
strategic alliances
provide an alternative choice to vertical integration and corporate diversification
provide an alternative choice to vertical integration only
a firms ability to learn is known as its
competitive advantage
absorptive capacity
distinctive competence
competitive position
Two possible substitutes for strategic alliances include
acquisitions and explicit collusion
going it alone and acquisitions
when the probability of cheating in a cooperative relationship is greatest, _______ is the preferred form of cooperation.
equity agreement
joint venture
licensing agreement
distribution agreement
_______ may enable partners to explore exchange opportunities that they could not explore if only legal and economic organizing mechanisms were in place.
trust
reputational effects
joint ventures
equity investments
When one firm acquires a(n)
of another firm, it has acquired enough of
that firm's assets so that the acquiring firm is able to make all the management and strategic decisions in the target firm.
controlling share
equity stake
equity share
market stake
The price of each of a firms shares multiplied by the number of shares outstanding represents the firms
total equity base
current market share
total market share
current market value
If an electronics manufacturer were to aquire a chain of retail electronic stores to sell its products, this would be an example of _____ merger.
product extension
vertical
market extension
horizontal
The difference between the current market price of a target firms shares and the price a potential acquirer offers to pay for those shares is known as an
acquisition discount
acquisition price
acquisition margin
acquisition premium
In general, the empirical evidence suggests that acquisitions, on average, ________ value for the acquiring firm.
destroy
create
have no significant impact on
create and then destroy
When a firm has not sold shares on the public stock market, it is known as
privately held
a small cap stock
closely held
publicly traded
In a related acquisition, if there is one target firm and twenty bidding firms, and the value of each of the bidding firms as a stand-alone entity is $80,000 and the value of the target firm as a stand-alone entity is $40,000, the market value of the combined entity is likely to be
$0.00
More than $120,000
$120,000
Less than $120,000
A thinly traded market is a market where
information about opportunities in this market is widely known.
the only important interest is to maximize the value of a firm
there are only a small number of buyers and sellers, where information about opportunities in this market is not widely know, and where interests besides purely maximizing the value of a firm can be important.
many firms are implementing acquisition strategies.
A _____ is another bidding firm that agrees to acquire a particular target in the place of the original bidding firm.
White Knight
Golden parachute
green mail
crown jwel
Which of the following is not used to determine a firm's level of vertical integration using the value added as a percentage of sales approach?
value added
net income
sales
gross margin
If Digipics were to begin manufacturing lenses for the cameras they assembled, this would be an example of
Backward vertical integration
forward vertical integration
If Digipics were to begin selling the cameras it assembled directly to customers through a website operated by the company, this would be an example of
Backward vertical integration
forward vertical integration
A firm's level of vertical integration is the number of steps in its value chain that the firm accomplishes within its boundaries.
true
false
A firm has implemented a strategy of ________ when all or most of its activities fall within a single industry and geographic market.
limited corporate diversification
related diversification
unrelated diversification
related-linked diversification
The most common organizational structure for implementing a corporate diversification strategy is the ________ structure.
m- form
matrix
u-form
A ________ is a form of nonequity alliance that exists when one firm allows another to use its brand name to sell its products.
supply agreement
]
distribution agreement
licensing agreement
joint venture
A(n) ________ exists whenever two or more independent organizations cooperate in the development, manufacture, or sale of products or services.
vertical market
strategic alliance
initial public offering
market transaction
A firm's ability to learn is known as its
competitive position.
competitive advantage.
distinctive competence.
absorptive capacity.
