Question 1

The March 2011 announcement that AT&T was acquiring T-Mobile USA from Deutsche Telekom is a _________ acquisition and is intended to
a. vertical; increase diversification

b. horizontal; increase market power

c. vertical; overcome entry barriers

d. related; increase speed to market

Question 2

Downsizing may be necessary because acquisitions often create a situation in which the newly formed firm has duplicate organizational functions such as sales, manufacturing, distribution, human resources, and management.

True

False

Question 3

The basic types of operational economies through which firms seek value from economies of scope are

a. synergies between internal and external capital markets.

b. the leveraging of individual tangible resources.

c. the sharing of primary and support activities.

d. joint ventures and outsourcing.

Question 4

Which acquisition would be considered the LEAST related?

a. a candy manufacturer purchases a chemical laboratory specializing in food flavorings.

b. a chain of garden centers acquires a landscape architecture firm.

c. a hospital acquires a long-term care nursing home.

d. an upscale "white-tablecloth" restaurant chain acquires a travel agency.

Question 5

The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a(n)

a. vertical acquisition.

b. unrelated acquisition.

c. horizontal acquisition.

d. merger of equals.

Question 6

A manager in your company is proposing the acquisition of Taylor Company, which has developed a new, innovative product instead of a strategy of developing new products in-house. All of the following arguments are correct EXCEPT

a. The acquisition of Taylor should be primarily for defensive rather than strategic reasons.

b. Research suggests that acquisition strategies are a common means of avoiding risky internal ventures.

c. The outcomes of acquisitions can be estimated more easily and accurately than the outcomes for an internal product

development process.

d. Acquisitions could become a substitute for innovation within your firm

Question 7

PorkPride Foods produces hams and other meat products. It owns hog raising operations. This is an example of a ____ business.

a. de-integrated

b. vertically integrated

c. totally integrated

d. horizontally integrated

Question 8

Coca Cola and PepsiCo compete across a number of products (e.g., soft drinks, bottled water) and geographic markets (U.S. and foreign markets) indicating that both companies have market commonality.

True

False

Question 9

Which of the following is a value-reducing reason for diversification?

a. enhancing the strategic competitiveness of the entire company

b. expanding the business portfolio in order to diversify managerial employment risk

c. gaining market power relative to competitors

d. conforming to antitrust regulation

Question 10

In order to compete effectively, standard-cycle firms need all of the following EXCEPT

a. large market share.

b. customer loyalty through brand name.

c. careful control of operations to preserve consistency for customers.

d. rapid and continuous product introductions

Question 11

Two firms, such as Fed Ex and UPS that have similar resources and common markets would be direct and mutually acknowledged competitors.

True

False

Question 12

It is more likely that locally owned, one-location cafes in a small town will respond more rapidly to tactical actions by each other than they will to strategic actions by the Burger King franchise that has recently moved to their town.

True

False

Question 13

Firms can increase their speed to market for new products by pursuing an internal product development strategy rather than an acquisition strategy.

True

False

Question 14

Which pair of firms has the LEAST resource similarity?

a. Small, family-owned Italian restaurant; Olive Garden

b. Target; Wal-Mart

c. HP; Dell

d. FedEx; UPS

Question 15

When a firm is overly dependent on one or more products or markets, and the intensity of rivalry in that market is intense, the firm may wish to ____ by making an acquisition.

a. increase new product speed to market

b. broaden its competitive scope

c. increase its economies of scale

d.overcome entry barriers

Question 16

Firms are more likely to enter a market through acquisition when high product loyalty is present in the industry.

True

False

Question 17

Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare and only two brick plants in the United States make this type of brick. Specialty Steel owns one of these brick plants and buys all of its production. The other brick manufacturer has recently developed an inexpensive new technology whereby ordinary clay can be used to make this fire brick. This significantly reduces the production cost of this type of brick.

a. Specialty Steel has less flexibility now than if it were not vertically integrated.

b. This is an example of a capacity balance problem.

c. This is a result of conflicts of interest between the managers of the brick plant and the executives of Specialty Steel.

d. The market power of Specialty Steel has been de-integrated.

Question 18

When implementing a restructuring strategy, a company would do best by focusing on mature, low-technology businesses rather than high-technology or service businesses.

True

False

Question 19

Competitors are more likely to respond to competitive actions that are taken by

a. differentiators.

b .larger companies.

c. first movers.

d. market leaders

Question 20

All of Krispy Kreme's revenues come from its one main product, doughnuts. It can be considered a classic example of a firm following a related constrained strategy.

True

False

Question 21

A company in a ____ industry is LEAST likely to make heavy use of patents and copyrights.

a. slow-cycle

b. medium-cycle

c. standard-cycle

d. fast-cycle

Question 22

What is the similarity between high-technology firms and service-based firms that makes them risky as restructuring candidates?

a. They are human-resource dependent.

b. They have few tangible assets.

c. Both types of firm rely on financial economies.

d. The demand for their products is highly sensitive to economic downturns

Question 23

Market power exists when a firm is able to sell its products above the existing competitive level or decrease the costs of its primary and support activities below the competitive level, or both.

True

False

Question 24

Because Coca-Cola, Nestle, and PepsiCo all sell a product (bottled water) that is essentially the same and all three giant companies are engaged in battles for market share using incremental changes in their products and seeking loyalty to brand names, it is most likely that the bottled water market is a(n)

a. slow-cycle market

b. standard cycle market.

c. fast-cycle market.

d. intermediate-cycle market

Question 25

Market commonality is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.

True

False

Question 26

Hutchison Whampoa Limited (HWL) has businesses in ports and related services, telecommunications, property and hotels, retail and manufacturing, and energy and infrastructure. HWL makes no efforts to share activities or transfer core competencies among the businesses. HWL is following a strategy of__________diversification.

a. dominant business

b. related constrained

c. related linked

d. unrelated

Question 27

One of the potential problems associated with acquisitions is that the additional costs required to manage the larger firm will exceed the benefits of economies of scale and additional market power.

True

False

Question 28

A significant benefit of an internal capital market is that corporate headquarters has access to detailed and accurate information regarding the performance of the company's portfolio and can thus make better capital allocation decisions.

True

False

Question 29

Caterpillar's payment of a 32 percent premium for the acquisition of Bucyrus in 2011 and subsequent need to issue more stock illustrates the acquisition problem of

a. integration difficulties.

b. inability to achieve synergy.

c. large or extraordinary debt.

d. managers overly focused on acquisitions

Question 30

Financial economies are cost savings realized through improved allocations of financial resources based on investments inside or outside the firm.

True

False

Question 31

The chief disadvantage of being a first mover is the

a. high degree of risk.

b. high level of competition in the new marketplace.

c. inability to earn above-average returns unless the production process is very efficient.

d. difficulty of obtaining new customers

Question 32

Dragonfly Publishers of children's books has purchased White Rabbit, another publisher of children's books. Both companies' books are sold to the same retail stores and schools. Their content is different, since Dragonfly produces children's literature, whereas White Rabbit focuses on child-level scientific and nature topics. Which of the following statements is probably TRUE about this acquisition?

a. This is a horizontal acquisition.

b. This is an example of virtual integration.

c. Dragonfly is beginning to build a conglomerate.

d. Economies of scope are unlikely to result from this acquisition