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Strategic Management: Strategic Managment
Gregory G. Dess, University of Texas at Dallas
G.T. Lumpkin, University of Illinois--Chicago

Corporate-Level Strategy: Creating Value Through Diversification

Multiple Choice Quiz



1

Individual investors are reliant on upon the corporation's managers to
A)diversify the stockholder's investments in order to reduce risk.
B)achieve risk reduction at a lower cost than stockholders could obtain on their own.
C)maximize short-term returns in the form of dividends.
D)add value to their investments in a way that the stockholders could not accomplish on their own.
2

One of the primary advantages of diversification is sharing core competencies. In order for diversification to be most successful, it is important that
A)the methods of production are the same.
B)the similarity required for sharing core competencies must be in the value chain, not in the product.
C)the products use similar distribution channels.
D)the target market is the same, even if the products are very different.
3

Vertical integration may be beneficial when
A)flexibility is reduced, providing a more stationary position in the competitive environment.
B)the minimum efficient scales of two corporations are different.
C)lower transaction costs and improved coordination are vital and achievable through vertical integration.
D)various segregated specializations will be combined.
4

When a firm's corporate office helps subsidiaries make wise choices in their own acquisitions, divestures, and new ventures, it is called___________.
A)restructuring
B)leveraging core competencies
C)uncreasing market power
D)parenting
5

In the BCG (Boston Consulting Group) Matrix, a business that has a low market share in an industry set apart by high market growth is termed a
A)star.
B)cash cow.
C)question mark.
D)dog.
6

Denoted in the Boston Consulting Group Portfolio management technique, a "cash cow, refers to a business that has
A)relatively low market share and low market growth.
B)low market growth and relatively high market share.
C)relatively low market share and high market growth.
D)high market growth and relatively high market share.
7

As stated by Michael Porter: "There's a tremendous allure to _______________. It's 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)mergers and acquisitions
B)strategic alliances and joint ventures
C)internal development
D)differentiation strategies
8

All of the following are guiding principles for managing strategic alliances except
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.
9

"Golden parachutes" signifies
A)pay given to executives fired because of a takeover.
B)a clause requiring that huge dividend payments be made upon takeover.
C)financial inducements offered by a threatened firm to stop a hostile suitor from acquiring it.
D)managers of a firm involved in a hostile takeover approaching a third about acquisition.