A) picking the new industries to enter and deciding on the means of entry.
B) initiating actions to boost the combined performance of the businesses the firm has entered.
C) pursuing opportunities to leverage cross-business value chain relationships and strategic fits into competitive advantage.
D) steering corporate resources into the most attractive business units.
E) All of these.
G) B) and D)
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A) Broadening the company's business scope by making new acquisitions in new industries
B) Increasing dividend payments to shareholders and/or repurchasing shares of the company's stock
C) Restructuring the company's business lineup and putting a whole new face on the company's business makeup
D) Sticking closely with the existing business lineup and pursuing opportunities these businesses present
E) Divesting weak-performing businesses and retrenching to a narrower base of business operations
G) C) and D)
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B
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A) the profit test, the competitive strength test, and the industry attractiveness test.
B) the better-off test, the competitive advantage test, and the profit expectations test.
C) the barrier to entry test, the competitive advantage test, and the stock price effect test.
D) the strategic fit test, the industry attractiveness test, and the dividend effect test.
E) the attractiveness test, the cost-of-entry test, and the better-off test.
G) A) and E)
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A) Checking whether the company's resources fit the requirements of its present business lineup
B) Scrutinizing each industry/business to determine where driving forces are strongest/weakest and how many profitable strategic groups the company has diversified into
C) Ranking the performance prospects of the various businesses from best to worst and determining what the corporate parent's priorities should be in allocating resources to its different businesses
D) Evaluating the extent of cross-business strategic fits
E) Assessing the competitive strength of each business the company has diversified into
G) A) and B)
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A) market size and projected growth rate.
B) emerging opportunities and threats, the intensity of competition, and the degree of industry uncertainty and business risk.
C) resource requirements and the presence of cross-industry strategic fits.
D) seasonal and cyclical factors, industry profitability, and whether an industry has significant social, political, regulatory, and environmental problems.
E) All of these.
G) None of the above
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A) ensure the appropriate weights are assigned to each measure and that the preparer has sufficient knowledge to rate the industry on each attractiveness measure.
B) ensure the weights are assigned evenly so as not to bias the attractiveness scores.
C) ensure at least three companies within the industry are clearly well-understood to ensure validated scores.
D) be prepared to make an educated guess if the available information is skimpy.
E) All of these.
G) B) and D)
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A) to have a quantitative basis for identifying which businesses have large/small competitive advantages or competitive disadvantages vis-à-vis the rivals in their respective industries.
B) to have a quantitative basis for rating them from strongest to weakest in terms of contributing to the corporate parent's revenue growth.
C) to compare resource strengths and weaknesses, business by business.
D) to have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries.
E) to have a quantitative basis for rating them from strongest to weakest in terms of contributing to the corporate parent's profitability.
G) A) and D)
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D
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A) has a distinctive competence in its related businesses.
B) has a clear path to achieving 1 + 1 = 3 synergy gains in shareholder value.
C) has a clear path to global market leadership in the industries where it has related businesses.
D) passes the value chain test and the profit expectations test for building shareholder value.
E) achieves economies of scope and passes the reduced-costs test for crafting a diversification strategy capable of creating added shareholder value.
G) A) and C)
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A) whether the parent company's competitive advantages are being deployed to maximum advantage in each of its business units.
B) whether the competitive strategies employed in each business act to reinforce the competitive power of the strategies employed in the company's other businesses.
C) whether the competitive strategies in each business possess good strategic fit with the parent company's corporate strategy.
D) the extent to which there are competitively valuable relationships between the value chains of sister business units and what opportunities they present to reduce costs, share use of a potent brand name, or transfer skills or technology or intellectual capital from one business to another.
E) how compatible the competitive strategies of the various sister businesses are and whether these strategies are properly aimed at achieving the same kind of competitive advantage.
G) All of the above
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A) the company's present businesses offer attractive growth opportunities and can be counted on to create economic value for shareholders.
B) companies are seeking multinational diversification.
C) corporate executives are excited about market opportunities.
D) corporate executives are satisfied with current performance of each of their businesses and can use redirect capabilities and resources for expansion opportunities
E) corporate executives want to divest some businesses and retrench to a narrower diversification base
G) All of the above
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A) selling a business outright.
B) spinning the unwanted business off as a managerially and financially independent company by selling shares to the investing public via an initial public offering of stock.
C) spinning the unwanted business off as a managerially and financially independent company by distributing shares in the new company to existing shareholders of the parent company.
D) All of the above.
E) None of the above; the best and quickest ways to divest a business are either to close it or else just walk away and give the keys to creditors.
G) None of the above
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A) assessing the attractiveness of the industries the company has diversified into.
B) assessing the competitive strength of each business the company has diversified into.
C) ranking the performance prospects of the various businesses from best to worst and determining the priorities for resource allocation.
D) evaluating the extent of cross-business strategic fits and also checking whether the firm's resources fit the needs of the various businesses the company has diversified into.
E) All of the above.
G) A) and B)
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A) internal capital market.
B) debt policy management.
C) liquidity management.
D) economic value added.
E) All of these.
G) C) and D)
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A) generates unusually high profits and returns on equity investment.
B) is so profitable that it has no long-term debt.
C) generates positive cash flows over and above its internal requirements, thus providing a corporate parent with cash flows that can be used for financing new acquisitions, investing in cash hog businesses, funding share buyback programs, and/or paying dividends.
D) is a business with such a strong competitive advantage that it generates big profits, big returns on investment, and big cash surpluses after dividends are paid.
E) has good strategic fit with a cash hog business.
G) A) and B)
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A) which industries appear to be the most and least attractiveness from the standpoint of the company's long-term performance.
B) which industries have attractive key success factors and which industries have unattractive key success factors.
C) which industries have the biggest economies of scale and which industries have the greatest economies of scope and the overall potential for cost reduction in the industries as a group.
D) which industries are most attractive from the standpoint of long-term growth and the growth prospects of all the industries as a group.
E) which industries are most attractive from the standpoint of industry driving forces and competitive forces.
G) A) and C)
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A
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A) each business is a cash cow.
B) a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin and when individual businesses add to a company's overall strengths.
C) each business is sufficiently profitable to generate an attractive return on invested capital.
D) each business unit produces large internal cash flows over and above what is needed to build and maintain the business.
E) the resource requirements of each business exactly match the company's available resources.
G) A) and E)
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A) is usually the most attractive long-run strategy for a broadly diversified company confronted with recession, high interest rates, mounting competitive pressures in several of its businesses, and sluggish growth.
B) is directed at improving long-term performance by building stronger positions in a smaller number of core businesses.
C) is an attractive strategy option for revamping a diverse business lineup that lacks strong cross-business financial fit.
D) is sometimes an attractive option for deepening a diversified company's technological expertise and supporting a faster rate of product innovation.
E) is a strategy best reserved for companies in poor financial shape.
G) D) and E)
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A) Broadly diversified enterprise
B) Narrowly diversified enterprise
C) Multibusiness enterprise
D) High-compensation/low-risk enterprise
E) Dominant business enterprise
G) None of the above
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A) expands a firm's competitive advantage opportunities to include a wider array of businesses.
B) spreads the stockholders' risks across a group of truly diverse businesses.
C) increases strategic fit opportunities and the potential for a 1 + 1 = 3 outcome on the bottom line.
D) results in having more cash cow businesses than cash hog businesses.
E) facilitates capturing the financial fits among sister businesses (as compared to a strategy of related diversification) .
G) A) and C)
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A) all of the potential acquisition candidates are losing money.
B) it is impractical to outsource most of the value chain activities that have to be performed in the target business/industry.
C) there is ample time to launch the new business from the ground up.
D) the company has built up a hoard of cash with which to finance a diversification effort.
E) none of the companies already in the industry are attractive strategic alliance partners.
G) B) and D)
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