Mgt 5700 Final

Front 1

A firm has implemented a strategy of limited corporate diversification when all or most of its
business activities fall within a single industry and geographic market.

Back 1

TRUE

Front 2

Shared activities can increase the revenues in diversified firms' businesses, and failure to exploit shared activities across businesses can lead to out-of-control costs.

Back 2

TRUE

Front 3

A firm's dominant logic is a common way of thinking about strategy across different businesses.

Back 3

TRUE

Front 4

The businesses within a diversified firm always gain cost-of-capital advantages by being part of
a diversified firm's portfolio.

Back 4

FALSE

Front 5

The only two economies of scope that do not have the potential for generating positive returns
for a firm's equity holders are diversification in order to maximize the size of a firm and
diversification to reduce risk.

Back 5

TRUE

Front 6

When the value of the products or services a firm sells increases as a function of the number of business that the firm operates in, ________ are said to exist.
A) vertical economies B) diseconomies of scope
C) economies of scope D) economies of scale

Back 6

C) economies of scope

Front 7

Currently, most scholars believe that exploiting economies of scope through corporate
diversification, on average,
A) destroyed about 25% of a firm's market value.
B) had no impact on a firm's market value.
C) increased a firm's market value.
D) destroyed about 55% of a firm's market value.

Back 7

C) increased a firm's market value.

Front 8

If all of a firm's businesses share the same core competencies, then that firm has implemented a
strategy of ________ diversification.
A) dominant-business B) related-linked
C) related-constrained D) single-business

Back 8

C) related-constrained

Front 9

________ exists when two or more diversified firms simultaneously compete in multiple
markets.
A) Multipoint cooperation

B) Dynamic cooperation
C) Multipoint competition

D) Dynamic competition

Back 9

C) Multipoint competition

Front 10

When diversified firms use the revenues from profitable businesses to subsidize the operations
of another business and then set the prices of the subsidized firm's products at a level that is
below the subsidized business's cost to produce these items, this is known as ________ pricing.
A) beneficial B) predatory

C) dynamic D) monopoly

Back 10

B) predatory

Front 11

Tacit collusion exists when firms coordinate their pricing decisions not by directly
communicating with each other but by exchanging signals with other firms about their intent to
cooperate.

Back 11

TRUE

Front 12

When potential cooperative partners misrepresent the skills, abilities, and other resources that they will bring to an alliance, this is a form of cheating known as adverse selection.

Back 12

TRUE

Front 13

Moral hazard occurs when partners in an alliance possess high-quality resources and
capabilities of significant value in an alliance but fail to make those resources and capabilities
available to alliance partners.

Back 13

TRUE

Front 14

Research on international joint ventures suggests that the existence of transaction-specific investments in their relationships makes these agreements relatively immune to holdup
problems.

Back 14

FALSE

Front 15

When there is low uncertainty about the future value of an exchange, an alliance will be
preferred to going it alone.

Back 15

FALSE

Front 16

A(n) ________ exists whenever two or more independent organizations cooperate in the
development, manufacture, or sale of products or services.
A) strategic alliance B) vertical market
C) initial public offering D) market transaction

Back 16

A) strategic alliance

Front 17

A firm's ability to learn is known as its
A) competitive advantage.

B) absorptive capacity.
C) distinctive competence.

D) competitive position.

Back 17

B) absorptive capacity.

Front 18

Strategic alliances are particularly valuable in facilitating market entry and exit when the value
of market entry or exit is
A) high.

B) moderate.

C) low.

D) uncertain.

Back 18

D) uncertain.

Front 19

Consistent with a real options perspective, firms in new and uncertain environments are likely to
A) engage in vertical integration.

B) develop few strategic alliances.
C) avoid using strategic alliances.

D) develop numerous strategic alliances

Back 19

D) develop numerous strategic alliances

Front 20

Adverse selection in a strategic alliance is likely only when

A) it is difficult or costly to know how competitors will react to the strategic alliance.
B) it is difficult or costly to observe the resources or capabilities that a partner brings to an alliance.
C) a potential partner can easily see the resources and capabilities that a firm is bringing to an alliance.
D) there are significant transaction-specific assets devoted to the alliance.

Back 20

B) it is difficult or costly to observe the resources or capabilities that a partner brings to an alliance.

Front 21

To be economically valuable, links between bidding and target firms must meet the same criteria as diversification strategies.

Back 21

TRUE

Front 22

One of the main reasons why bidding firms do not obtain competitive advantages from
acquiring strategically related target firms is that several other bidding firms value the target
firm the same way

Back 22

TRUE

Front 23

Strategy researchers have found that in mergers and acquisitions, the more strategically related
bidding and target firms are, the more economic value these mergers and acquisitions create.

Back 23

TRUE

Front 24

When acquiring a publicly traded firm a bidder has to release all the information it has about the potential value of that target in combination with itself.

Back 24

FALSE

Front 25

The market for corporate control is the market that is created when multiple firms actively seek
to acquire one or several firms.

Back 25

TRUE

Front 26

The difference between the current market price of a target firm's shares and the price a potential
acquirer offers to pay for those shares is known as an
A) acquisition margin. B) acquisition premium.
C) acquisition discount. D) acquisition price

Back 26

B) acquisition premium

Front 27

Which of the following is a source of diversification economies?
A) Marketing B) Production
C) Scheduling D) Portfolio management

Back 27

D) Portfolio management

Front 28

________ economies are achieved by the ability of firms to dictate prices by exerting market
power.
A) Production B) Diversification
C) Pecuniary D) Technical

Back 28

C) Pecuniary

Front 29

Which one of the following is not one of the reasons that Jensen and Ruback listed as to why bidding firms might want to engage in merger and acquisition strategies?
A) To expand individual managers' power within an organization
B) To eliminate inefficient target management
C) To reduce production or distribution costs
D) To gain market power in product markets

Back 29

A) To expand individual managers' power within an organization

Front 30

Wealthy individuals who provide capital to entrepreneurs to help them grow their businesses are known as
A) CEOs. B) stockholders.
C) venture capitalists. D) business angels.

Back 30

D) business angels.