Question 1

Which of the following is not part of a good guideline list for managing strategic alliances?

Accepted Answer

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 partnersE) None of the above
F) All of the above

Question 2

Vertical integration is attractive when

Accepted Answer

A)  internal administrative costs are higher than transaction costs.
B)  transaction costs and internal administrative costs are equal.
C)  transaction costs are higher than internal administrative costs.
D)  search costs are higher than monitoring costs.E) A) and C)
F) All of the above

Question 3

One of the reasons that the Cisco acquisition of the Flip product failed is that the core businesses were very different.

Accepted Answer

A) True 
 B)False

Question 4

If a multinational firm fails to effectively integrate their acquisitions, this can result in

Accepted Answer

A)  cost savings.
B)  divestiture.
C)  expansion.
D)  further acquisition.E) All of the above
F) B) and D)

Question 5

Benefits derived from horizontal and hierarchical relationships are mutually exclusive.

Accepted Answer

A) True 
 B)False

Question 6

Divesting of businesses can accomplish many different objectives, except

Accepted Answer

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)  raising cash to help fund existing businesses.
D)  dispersing manager focus.E) None of the above
F) B) and C)

Question 7

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 ______.

Accepted Answer

A)  greenmail
B)  a golden parachute
C)  a poison pill
D)  scorched earthE) A) and B)
F) C) and D)

Question 8

Antitakeover defenses are always a management ploy to protect their own self interests.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a reason for merger and acquisition failures?

Accepted Answer

A)  The acquiring company pays a premium for the common stock of the target company.
B)  Top executives act in their best interests rather than those of the shareholders.
C)  The acquired company assets are poorly integrated into the acquiring company business lines.
D)  The acquisition leads to value creation.E) None of the above
F) A) and D)

Question 10

For a core competency to create value and provide a viable basis for synergy among the businesses in a corporation, it must at least create superior customer value and it must be difficult to imitate.

Accepted Answer

A) True 
 B)False

Question 11

Greenmail is an offer by a company, threatened by takeover, to offer its stock at a reduced price to a third party.

Accepted Answer

A) True 
 B)False

Question 12

Transaction costs include all of the following costs except

Accepted Answer

A)  agency costs.
B)  negotiating costs.
C)  search costs.
D)  monitoring costs.E) A) and C)
F) All of the above

Question 13

Diversification initiatives must be justified by the creation of value for shareholders.

Accepted Answer

A) True 
 B)False

Question 14

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.

Accepted Answer

A) True 
 B)False

Question 15

Among the advantages of acquisitions are the expensive premiums that are frequently paid to acquire a business.

Accepted Answer

A) True 
 B)False

Question 16

The term golden parachute refers to

Accepted Answer

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.E) All of the above
F) A) and B)

Question 17

Former Merrill Lynch CEO John Thain gave out 4 billion USD in discretionary year-end bonuses just before the company was rescued by Bank of America. This practice demonstrates managerial greed.

Accepted Answer

A) True 
 B)False

Question 18

Risk reduction by itself is usually a means to create shareholder value, regardless of the overall diversification strategy of the firm.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 6: Corporate-Level Strategy: Creating Value Through Diversification

Former Merrill Lynch CEO John Thain gave out 4 billion USD in discretionary year-end bonuses just before the company was rescued by Bank of America. This practice demonstrates managerial greed.

Correct AnswerverifiedShow Answer

Among the advantages of acquisitions are the expensive premiums that are frequently paid to acquire a business.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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 ______.

Correct AnswerverifiedShow Answer

Transaction costs include all of the following costs except

Correct AnswerverifiedShow Answer

Divesting of businesses can accomplish many different objectives, except

Correct AnswerverifiedShow Answer

If a multinational firm fails to effectively integrate their acquisitions, this can result in

Correct AnswerverifiedShow Answer

Diversification initiatives must be justified by the creation of value for shareholders.

Correct AnswerverifiedShow Answer

The term golden parachute refers to

Correct AnswerverifiedShow Answer

Which of the following is not a reason for merger and acquisition failures?

Correct AnswerverifiedShow Answer

Antitakeover defenses are always a management ploy to protect their own self interests.

Correct AnswerverifiedShow Answer

Which of the following is not part of a good guideline list for managing strategic alliances?

Correct AnswerverifiedShow Answer

For a core competency to create value and provide a viable basis for synergy among the businesses in a corporation, it must at least create superior customer value and it must be difficult to imitate.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Vertical integration is attractive when

Correct AnswerverifiedShow Answer

Greenmail is an offer by a company, threatened by takeover, to offer its stock at a reduced price to a third party.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One of the reasons that the Cisco acquisition of the Flip product failed is that the core businesses were very different.

Correct AnswerverifiedShow Answer

Benefits derived from horizontal and hierarchical relationships are mutually exclusive.

Correct AnswerverifiedShow Answer

Risk reduction by itself is usually a means to create shareholder value, regardless of the overall diversification strategy of the firm.

Correct AnswerverifiedShow Answer

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