When using a BCG matrix, a business that currently holds a large market share in a rapidly growing market and has minimal or negative cash flow would be known as a __________.

71.

According to the text, corporate restructuring includes    A.  capital restructuring, asset restructuring, and technology restructuring B.  global diversification, capital restructuring, and asset restructuring C.  management restructuring, financial restructuring, and procurement restructuring D.  capital restructuring, asset restructuring, and management restructuring Restructuring can involve changes in assets, capital structure, or management.

AACSB: Analytic Blooms: Remember Learning Objective: 06-04 How corporations can use unrelated diversification to attain synergistic benefits through corporate restructuring; parenting; and portfolio analysis. Level of Difficulty: 1 Easy Topic: Unrelated Diversification through Financial Synergies and Parenting

72.

Portfolio management matrices are applied to what level of strategy?    A.  departmental level B.  business level C.  international level D.  corporate level Corporate-level strategy addresses two related issues: what businesses should a corporation compete in and how can these businesses be managed so they create synergy. Portfolio management matrices can be used to improve understanding of the competitive position of a portfolio (or family) of businesses, to suggest strategic alternatives, and to identify priorities for the allocation of resources.

AACSB: Analytic Blooms: Understand Learning Objective: 06-04 How corporations can use unrelated diversification to attain synergistic benefits through corporate restructuring; parenting; and portfolio analysis. Level of Difficulty: 2 Medium Topic: Unrelated Diversification through Financial Synergies and Parenting

73.

When using a BCG matrix, a business that currently holds a large market share in a rapidly growing market and has minimal or negative cash flow would be known as a __________.    A.  Cash Cow B.  Dog C.  Star D.  Question Mark Each of the four quadrants of the BCG Portfolio grid has different implications for the SBUs that fall into that category. Stars are SBUs competing in high-growth industries with relatively high market shares. These firms have long-term growth potential and should continue to receive substantial investment funding.

AACSB: Analytic Blooms: Remember Learning Objective: 06-04 How corporations can use unrelated diversification to attain synergistic benefits through corporate restructuring; parenting; and portfolio analysis. Level of Difficulty: 1 Easy Topic: Unrelated Diversification through Financial Synergies and Parenting

74.

In the BCG Matrix, a business that has a low market share in an industry characterized by high market growth is termed a ____________.    A.  Star B.  Cash Cow C.  Question Mark D.  Dog Each of the four quadrants of the BCG Portfolio grid has different implications for the SBUs that fall into that category. Question Marks are SBUs competing in high-growth industries but having relatively weak market shares. Resources should be invested in them to enhance their competitive positions.

AACSB: Analytic Blooms: Remember Learning Objective: 06-04 How corporations can use unrelated diversification to attain synergistic benefits through corporate restructuring; parenting; and portfolio analysis. Level of Difficulty: 1 Easy Topic: Unrelated Diversification through Financial Synergies and Parenting

75.

Portfolio management frameworks, such as the BCG matrix, share which of the following characteristics?    A.  Businesses are plotted on a 3-dimensional grid. B.  Grid dimensions are based on external environments and internal capabilities/market positions. C.  Position in the matrix suggests a need for sharing synergies. D.  They are most helpful in helping businesses develop types of competitive advantage. Portfolio models are overly simplistic, consisting of only two dimensions (growth and market share). They view each business as separate, ignoring potential synergies across businesses.

AACSB: Analytic Blooms: Remember Learning Objective: 06-04 How corporations can use unrelated diversification to attain synergistic benefits through corporate restructuring; parenting; and portfolio analysis. Level of Difficulty: 1 Easy Topic: Unrelated Diversification through Financial Synergies and Parenting

76.

A Cash Cow, in the BCG framework, refers to a business that has _______________.    A.  high market growth and relatively high market share B.  relatively low market share and low market growth C.  relatively low market share and high market growth D.  low market growth and relatively high market share Each of the four quadrants of the BCG Portfolio grid has different implications for the SBUs that fall into that category. Cash Cows are SBUs with high market shares in low-growth industries. These units have limited long-run potential but represent a source of current cash flows to fund investments in Stars and Question Marks.

AACSB: Analytic Blooms: Remember Learning Objective: 06-04 How corporations can use unrelated diversification to attain synergistic benefits through corporate restructuring; parenting; and portfolio analysis. Level of Difficulty: 1 Easy Topic: Unrelated Diversification through Financial Synergies and Parenting

77.

In managing the corporate portfolio, the BCG matrix would suggest that __________.    A.  Dogs should be invested in to increase market share and become Cash Cows B.  Stars are in low growth markets and can provide excess cash to fund other opportunities C.  Cash Cows require substantial cash outlays to maintain market share D.  Question Marks can represent future Stars if their market share is increased Each of the four quadrants of the BCG Portfolio grid has different implications for the SBUs that fall into that category. Question Marks are SBUs competing in high-growth industries but having relatively weak market shares. Resources should be invested in them to enhance their competitive positions, potentially making them Stars.

AACSB: Analytic Blooms: Understand Learning Objective: 06-04 How corporations can use unrelated diversification to attain synergistic benefits through corporate restructuring; parenting; and portfolio analysis. Level of Difficulty: 2 Medium Topic: Unrelated Diversification through Financial Synergies and Parenting

78.

In the BCG Growth Share Matrix, the suggested strategy for Stars is to ________.    A.  milk them to finance other businesses B.  invest large sums to gain a good market share C.  maintain position and after the market growth slows use the business to provide cash flow D.  not invest in them and to shift cash flow to other businesses Stars are SBUs competing in high-growth industries with relatively high market shares. These firms have long-term growth potential and should continue to receive substantial investment funding. When growth slows, they may become Cash Cows themselves.

AACSB: Analytic Blooms: Understand Learning Objective: 06-04 How corporations can use unrelated diversification to attain synergistic benefits through corporate restructuring; parenting; and portfolio analysis. Level of Difficulty: 2 Medium Topic: Unrelated Diversification through Financial Synergies and Parenting

79.

All of the following are limitations (or downsides) of the BCG (Boston Consulting Group) matrix EXCEPT:    A.  Every business cannot be accurately measured and compared on the two dimensions. B.  It takes a dynamic view of competition which can lead to overly complex analyses. C.  It views each business as a stand-alone entity and ignores the potential for synergies across businesses. D.  While easy to comprehend, the BCG matrix can lead to some troublesome and overly simplistic prescriptions. There are some notable downsides to portfolio models. They compare SBUs on only two dimensions, making the erroneous assumption that those are the only factors that really matter and that every unit can be accurately compared on that basis. The approach views each SBU as a stand-alone entity, ignoring the promise for synergies across business units. The process can become mechanical, substituting an oversimplified graphical model for the important contributions of management judgment. Reliance on strict rules regarding resource allocation across SBUs can be detrimental to long-term viability for the firm. While easy to comprehend, the imagery of the BCG matrix can lead to some troublesome, overly simplistic prescriptions.

AACSB: Analytic Blooms: Understand Learning Objective: 06-04 How corporations can use unrelated diversification to attain synergistic benefits through corporate restructuring; parenting; and portfolio analysis. Level of Difficulty: 2 Medium Topic: Unrelated Diversification through Financial Synergies and Parenting

80.

The primary means by which a firm can diversify are __________, _________, and ________.    A.  mergers and acquisitions; differentiation; overall cost leadership B.  mergers and acquisitions; joint ventures and strategic alliances; internal development C.  joint ventures and strategic alliances; integration of value chain activities; acquiring human capital D.  mergers and acquisitions; internal development; differentiation There are three basic means of diversification: First, through acquisitions or mergers, corporations can directly acquire company assets and competencies. Second, corporations may agree to pool the resources of other companies with their resource base, commonly known as a joint venture or strategic alliance. Third, corporations may diversify into new products, markets, and technologies through internal development.

AACSB: Analytic Blooms: Remember Learning Objective: 06-05 The various means of engaging in diversification-mergers and acquisitions; joint ventures/strategic alliances; and internal development. Level of Difficulty: 1 Easy Topic: The Means to Achieve Diversification

81.

The downsides or limitations of mergers and acquisitions include all of the following EXCEPT:    A.  Premiums that are frequently paid to acquire a business are expensive. B.  Difficulties exist in integrating the activities and resources of the acquired firm into on-going operations. C.  There can be many cultural issues that can doom an otherwise promising acquisition. D.  It is a slow means to enter new markets and acquire skills and competences. There are several limitations of mergers and acquisitions including that takeover premiums paid for acquisitions are typically very high, competing firms often can imitate any advantages or copy synergies that result from the merger or acquisition, manager egos sometimes get in the way of sound business decisions, and cultural issues may doom the intended benefits from M and A endeavors.

AACSB: Analytic Blooms: Understand Learning Objective: 06-05 The various means of engaging in diversification-mergers and acquisitions; joint ventures/strategic alliances; and internal development. Level of Difficulty: 2 Medium Topic: The Means to Achieve Diversification

82.

Divesting of businesses can accomplish many different objectives, except _______.    A.  enabling managers to focus their efforts more directly on the core businesses of the firm B.  providing the firm with more resources to spend on more attractive alternatives C.  dispersing manager focus D.  raising cash to help fund existing businesses Divesting a business can accomplish many different objectives including: enabling managers to focus their efforts more directly on the core businesses of the firm, providing the firm with more resources to spend on more attractive alternatives, and raising cash to help fund existing businesses.

AACSB: Analytic Blooms: Understand Learning Objective: 06-05 The various means of engaging in diversification-mergers and acquisitions; joint ventures/strategic alliances; and internal development. Level of Difficulty: 2 Medium Topic: The Means to Achieve Diversification

83.

Verizon Wireless and ILS Technology have a _________ whereby Verizon integrates technology developed by ILS to improve its machine-to machine (M2M) data transmission systems. M2M systems allow firms to securely transmit data to and from various devices.    A.  joint diversification B.  divestment C.  strategic alliance D.  global integration Strategic alliances may be used to build jointly on the technological expertise of two or more companies. This may enable them to develop products technologically beyond the capability of the companies acting independently.

AACSB: Analytic Blooms: Understand Learning Objective: 06-05 The various means of engaging in diversification-mergers and acquisitions; joint ventures/strategic alliances; and internal development. Level of Difficulty: 2 Medium Topic: The Means to Achieve Diversification

84.

Cooperative relationships such as __________ have potential advantages such as entering new markets, reducing manufacturing (or other) costs in the value chain, and developing and diffusing new technologies.    A.  joint ventures B.  mergers C.  acquisitions D.  joint ventures and strategic alliances Strategic alliances and joint ventures have many potential advantages. Among these are entering new markets, reducing manufacturing (or other) costs in the value chain, and developing and diffusing new technologies.

AACSB: Analytic Blooms: Understand Learning Objective: 06-05 The various means of engaging in diversification-mergers and acquisitions; joint ventures/strategic alliances; and internal development. Level of Difficulty: 2 Medium Topic: The Means to Achieve Diversification

85.

Which of the following is not part of a good guideline list for managing strategic alliances?    A.  establishing a clear understanding between partners B.  not shortchanging your partner C.  relying primarily on a contract to make the joint venture work D.  working hard to ensure a collaborative relationship between partners Strategic alliances and joint ventures should ensure the strengths contributed by the partners are unique; thus synergies created can be more easily sustained over the longer term. The goal is to develop synergies between partner contributions, resulting in a win-win situation. Moreover, the partners must be compatible and willing to trust each other. These partnerships may be undertaken with or without a contract.

AACSB: Analytic Blooms: Understand Learning Objective: 06-05 The various means of engaging in diversification-mergers and acquisitions; joint ventures/strategic alliances; and internal development. Level of Difficulty: 2 Medium Topic: The Means to Achieve Diversification

86.

Which of the following statements regarding internal development as a means of diversification is FALSE?    A.  Many companies use internal development to extend their product or service offers. B.  An advantage of internal development is that it is generally faster than other means of diversification and firms can benefit from speed in developing new products and services. C.  The firm is able to capture wealth created without having to share the wealth with alliance partners. D.  Firms can often develop products or services at a lower cost, if they rely on their own resources instead of external funding. Potential disadvantages to internal development include that it may be time consuming and that firms may forfeit the benefits of speed that growth through mergers can provide. This may be important to high-tech or knowledge-based organizations in fast-paced environments in which being an early mover is critical.

AACSB: Analytic Blooms: Understand Learning Objective: 06-05 The various means of engaging in diversification-mergers and acquisitions; joint ventures/strategic alliances; and internal development. Level of Difficulty: 2 Medium Topic: The Means to Achieve Diversification

87.

Internal development may be time consuming and, therefore, firms may forfeit the benefits of speed that growth through __________ and __________ can provide.    A.  strategic alliances; joint ventures B.  strategic alliances; mergers C.  mergers; acquisitions D.  mergers; strategic alliances There are potential disadvantages to internal development. It may be time consuming; firms may forfeit the benefits of speed that growth through mergers can provide. This may be important among high-tech or a knowledge-based organization in fast-paced environments, where being an early mover is critical.

AACSB: Analytic Blooms: Understand Learning Objective: 06-05 The various means of engaging in diversification-mergers and acquisitions; joint ventures/strategic alliances; and internal development. Level of Difficulty: 2 Medium Topic: The Means to Achieve Diversification

88.

According to Michael Porter, there is a tremendous allure to _________. It is the big play, the dramatic gesture. With one stroke of the pen you can add billions to size, get a front-page story, and create excitement in markets.    A.  strategic alliances and joint ventures B.  internal development C.  mergers and acquisitions D.  differentiation strategies There is an excitement and associated recognition of making a major acquisition. Michael Porter of Harvard University noted that there is a tremendous allure to mergers and acquisitions. It is the big play, the dramatic gesture. With one stroke of the pen you can add billions to size, get a front-page story, and create excitement in markets.

AACSB: Analytic Blooms: Apply Learning Objective: 06-06 Managerial behaviors that can erode the creation of value. Level of Difficulty: 3 Hard Topic: How Managerial Motives Can Erode Value Creation

89.

The antitakeover tactic, _______, is when a firm offers to buy shares of their stock from a company (or individual) planning to acquire their firm at a higher price than the unfriendly company paid for it.    A.  golden parachute B.  poison pill C.  greenmail D.  scorched earth Greenmail is an effort by the target firm to prevent an impending takeover. When a hostile firm buys a large block of outstanding target company stock and the target company management feels that a tender offer is impending, they offer to buy the stock back from the hostile company at a higher price than the unfriendly company paid for it.

AACSB: Analytic Blooms: Remember Learning Objective: 06-06 Managerial behaviors that can erode the creation of value. Level of Difficulty: 1 Easy Topic: How Managerial Motives Can Erode Value Creation

90.

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 ______.    A.  greenmail B.  a golden parachute C.  a poison pill D.  scorched earth Poison pills are an antitakeover tactic used by a company to give shareholders certain rights in the event of a takeover by another firm. They are also known as shareholder rights plans.

AACSB: Analytic Blooms: Remember Learning Objective: 06-06 Managerial behaviors that can erode the creation of value. Level of Difficulty: 1 Easy Topic: How Managerial Motives Can Erode Value Creation 91. The term golden parachute refers to _________.    A.  a clause requiring that huge dividend payments be made upon takeover B.  pay given to executives fired because of a takeover C.  financial inducements offered by a threatened firm to stop a hostile suitor from acquiring it D.  managers of a firm in a hostile takeover approaching a third party about making the acquisition A golden parachute is a prearranged contract with managers specifying that, in the event of a hostile takeover, the target company managers will be paid a significant severance package. AACSB: Analytic Blooms: Remember Learning Objective: 06-06 Managerial behaviors that can erode the creation of value. Level of Difficulty: 1 Easy Topic: How Managerial Motives Can Erode Value Creation   92. Antitakeover tactics include all of the following EXCEPT _________.    A.  greenmail B.  poison pills C.  golden parachutes D.  golden handcuffs Antitakeover tactics are common, including greenmail, golden parachutes, and poison pills. AACSB: Analytic Blooms: Remember Learning Objective: 06-06 Managerial behaviors that can erode the creation of value. Level of Difficulty: 1 Easy Topic: How Managerial Motives Can Erode Value Creation