Strategic Management Concepts and Cases 1st Edition Dyer Test Bank Download

Test Bank for Strategic Management Concepts
and Cases 1st Edition Dyer Godfrey Jensen Bryce

0470937386 9780470937389
Download full test bank at:

https://testbankpack.com/p/test-bank-for-strategic-
management-concepts-and-cases-1st-edition-dyer-godfrey-
jensen-bryce-0470937386-9780470937389/
Download full solution manual at:
https://testbankpack.com/p/solution-manual-for-strategic-
management-concepts-and-cases-1st-edition-dyer-godfrey-
jensen-bryce-0470937386-9780470937389/
Chapter 6: Corporate Strategy
Multiple Choice Questions
1. The search for competitive advantage within a single industry, market, or line of
business best defines the term _____.
A. complementary service strategy
B. corporate strategy
C. business unit strategy
D. cost advantage strategy
Answer: C
Level of Difficulty: Easy
Section reference: Corporate versus Business Unit Strategy
Learning Objective: 6.1
Bloom’s: Knowledge
AACSB: Analytical thinking
2. Venus Inc. is a large firm that sells several healthcare products such as bathing soaps,
shampoos, body creams, and baby products. Each of these products has its own
customer base. Individually, each of these products has upheld unique approaches to
establish and maintain competitive advantage over its own rival companies that sell
similar products. Which of the following strategies does Venus Inc. use for its
products?
A. Business unit strategy
B. Global marketing strategy
C. Corporate strategy
Copyright ©2016 John Wiley & Sons, Inc.

D. Economic spending strategy
Answer: A
Level of Difficulty: Hard
Bloom’s: Application
AACSB: Application of knowledge
3. Rest & Sleep Inc. is a mattress manufacturing firm. By manufacturing related

products such as bed covers, comforters and quilts, and pillows, it has gained
significant competitive advantage as it has managed to create profits in all these
markets as well. Rest & Sleep creates a challenge for the other companies in the
market by providing unique value through its customer services and warranties.
Which of the following terms best describes what Rest & Sleep Inc. is practicing?
A. Market penetration
B. Business unit strategy
C. Corporate strategy
D. Unrelated diversification
Answer: C
4. Movement into adjacent markets by a firm along its own value chain can be best
termed _____.
A. vertical integration
B. horizontal specialization
C. horizontal diversification
D. unrelated diversification
Answer: A
5. Brentwood Industries, a furniture company, bought a supplier factory that creates raw
materials for the whole range of products Brentwood manufactures. Brentwood has

made sure not to look for outside sources for providing the company’s raw materials.
Brentwood Industries is practicing _____.
A. market penetration
B. unrelated diversification
C. vertical integration
D. horizontal diversification
Answer: C
6. Pisces Corp. is an apparel manufacturing company. It purchased a few of its raw

material suppliers and set up their factories close to the clothing stores so that the
company does not have to invest on transportation charges. This is an example of
_____.
A. downward diversification
B. forward integration
C. backward integration
Answer: C
7. Markus United Inc., a soap manufacturing company, maintained strategic advantage

over other companies by retaining profits in a unique way. The company bought a few
distributors in order to improve efficiency and cut down transportation costs while
distributing its products to retail stores. The company generated more profits than its
competitors this way. This is an example of _____.
A. horizontal diversification
B. backward integration
C. forward integration
D. horizontal specialization
Answer: C

8. Movement by a firm along its own value chain in the direction of sales, service, or
warranty operations is termed _____.
A. horizontal specialization
B. backward integration
Answer: C
9. The movement into an adjacent, or unrelated, market that is not along a firm’s own
value chain defines the term _____.
A. horizontal diversification
B. vertical specialization
D. backward integration
Answer: A
10. Marble Cakes Inc., after serving a good number of customers in its home state, has set
up business in three other states with additional menu options of cupcakes, donuts,
and coffees to generate new customers. This has enabled the company to successfully
maintain its corporate strategy. Marble Cakes Inc. is engaging in _____.
B. horizontal specialization
C. vertical specialization
Answer: D

11. Pluto Corp. has been manufacturing hardware materials for its existing customer base
for several years. Recently, the company introduced a new line of electronic products
to its customers. Pluto Corp. is engaging in _____.
B. market penetration
C. value based initiative
Answer: D
12. Which of the following statements is true of a corporate strategy?

A. It refers to a management strategy that focuses solely on the professional behavior
and attitudes of a company’s employees.
B. It entails competing in a core industry or business and also operating in adjacent
businesses or markets.
C. It entails competing exclusively with large and well-established firms to increase
competitive advantage.
D. It refers to the overall strategy that helps a company recruit the right type of
employees for the right type of job.
Answer: B
Level of Difficulty: Moderate
Bloom’s: Comprehension
13. Which of the following is an example of a horizontal diversification?

A. A new company selling a new product in the market
B. An old company increasing its supply of existing products
C. A company acquiring its raw materials from many parts of the world
D. A new company trying to reintroduce an old product with improved advertising
tactics

Answer: A
14. Which of the following is a defining feature of firms that practice related-
constrained diversification?
A. They earn more than 70 percent of their revenues from their main line of business
and the rest from businesses located along the value chain.
B. They earn less than 70 percent of their revenues from their main line of business
and their other lines of business share product, technological, and distribution
linkages with the main business.
C. They operate in related markets, but fewer linkages exist between the new and
existing markets than the elements create separately.
D. They earn more than 95 percent of the revenues from a single line of business.
Answer: B
Section reference: Creating Value through Diversification
15. A dominant vertical business differs from a dominant business in that a dominant
business:
A. earns 30 percent of its revenue from businesses located along the value chain of its
main line of business.
B. earns 30 percent of its revenue from business lines across different value chains.
C. earns less than 70 percent of its revenue from its main line of business.
D. earns more than 95 percent of its revenue from its main line of business.
Answer: B
16. Which of the following statements is true of a dominant vertical business?

A. It earns less than 70 percent of its revenue from its main line of business.
B. It earns more than 95 percent of revenue from its main line of business.

C. It earns 30 percent of its revenue from business lines across different value chains.
D. It earns 30 percent of its revenue from businesses located along the value chain.
Answer: D
17. Sparkle LLC, a beverage industry, earns almost all of its profits only by selling
beverages. Sparkle LLC can be best categorized as a _____.
A. single business
B. diversified business
C. dominant vertical business
D. dominant business
Answer: A
18. The main focus of Neptune Corp. is to sell apparel, which amounts to 70 percent of
its revenue. It also runs warehouses, distribution centers, and logistics as additional
businesses that generate the rest of the 30 percent of the earnings. Which level of
diversification is followed by Neptune Corp.?
A. Single business
B. Dominant business
C. Related-linked business
D. Dominant vertical business
Answer: D
19. Virgo Inc. earns less than 70 percent of its revenue from manufacturing computers.
It recently started manufacturing tablets. The company made use of existing
technology and materials and decided to distribute the tablets through the same
distributors used for its computers. In this scenario, Virgo Inc. chose _____.

A. related-constrained diversification
B. related-linked diversification
C. unrelated-constrained diversification
D. unrelated-linked diversification
Answer: A
20. Saturn Inc. is an e-commerce company that sells home appliances. The firm recently
started selling its line of packaged food items online. In this scenario, Saturn Inc.
chose _____.
A. unrelated-linked diversification
B. related-constrained diversification
C. unrelated-constrained diversification
D. related-linked diversification
Answer: D
21. Azure LLC is a toy manufacturing company. The company has recently started
manufacturing industrial wiring for construction companies. In this scenario, Azure
LLC has chosen _____.
A. related diversification
C. related-linked diversification
D. related-constrained diversification
Answer: B

22. Zia, the CEO of Indigo Corp., states that it is essential to diversify the company into
new markets and to create new products. She believes that it is important and
profitable to tap new customer bases and challenging markets as this experience will
help the company grow financially as well as expand its knowledge base on
strategic management. Which of the following statements strengthens Zia’s belief?
A. Moderate diversification pays off but very high levels of diversification will lead to
lower levels of performance.
B. The company will not be able to provide the same value and customer satisfaction
when segmented.
C. Diversification will create a loss of revenue if the parent company decides to
segment itself to different markets.
D. Diversification will reduce the company’s overall cost of producing goods and
services.
Answer: D
Bloom’s: Analyze
AACSB: Reflective thinking
23. Elegant Meals Inc., a company that owns a chain of restaurants, sells dinnerware to
its customers who fancy them. Since their restaurants are known for their interior
designs, they also sell home décor products. By selling these products, Elegant
Meals Inc. caters to a(n) _____.
A. entertainment market
B. capital market
C. adjacent market
D. global market
Answer: C
24. Winter Sources Inc., an apparel manufacturer, recently opened a retail store in its
unused office space to sell the excess material produced. In this way, the company
generated extra profits. The unused space that was available to Winter Sources Inc.
is an example of _____.
A. kanban
B. kaizen
C. hubris

D. slack
Answer: D
25. Jupiter LLC is a manufacturer of leather items. The board of directors of Jupiter
realized that it is better to produce handbags and shoes together rather than in two
separate factories. This way, the company can reduce its production costs. This
scenario best illustrates a(n) _____.
A. related-linked diversification
C. economy of scope
D. economy of scale
Answer: C
26. Summer Technologies Inc. is proud of its managerial personnel who have been able
to create unique value for the company. These people have been engaged in coming
up with strategic activities that enabled Summer Technologies to grow and establish
itself as a reliable brand. This set of abilities of the Summer Technologies personnel
can most accurately be termed _____.
A. management skill
B. employee expertise
C. collective wisdom
D. explicit knowledge
Answer: A

27. Aquarius Corp., a consumer goods company, offers a chain of products that includes
food and beverages, beauty care products, apparels, and home décor. By offering
these goods, Aquarius creates more value for itself than it would have if it had sold
these products individually. This practice by Aquarius Corp. can be referred to as
_____.
A. imitation
B. synergy
C. a merger
D. an acquisition
Answer: B
28. Spring Resources LLC creates unique value by establishing a learning organization
that coordinates various production tactics and assimilates different types of
technologies. This knowledge is distributed to the entire organization so that its
branches can adapt and perform according to their own markets. These tactics and
technologies distributed throughout the organization that create value for Spring
Resources LLC are termed _____.
A. inimitability practices
B. prestige development
C. core competencies
D. dominant logic
Answer: C
29. Galaxy Corp. is a manufacturing company that aims to provide value to its
customers by identifying sources of revenue, the intended customer base, products
and processes, and details of financing. This method that Galaxy Corp. wants to
adopt is termed _____.
A. a plan of action
B. a business model
C. dominant logic
D. prestige development

Answer: B
30. Even though companies offer varied products and provide unique value to their
customers, they have similar barriers to face when entering into a host country due
to policies set up by the country’s government. The similarities shared by the
companies in the way they set up business in the country are an example of a(n)
_____.
A. plan of action
B. passive judgment
C. dominant logic
D. imitation
Answer: C
31. Which of the following is an ancient Greek word for excessive pride, arrogance, or
overconfidence that is used to refer to the actions of managers when they diversify
or make acquisitions based on their own experience or gut feelings rather than on
solid data and research?
A. Kanban
B. Hubris
C. Agora
D. Kaizen
Answer: B
32. Stacy works as a manager at Daffodils Corp., a manufacturing firm that has not
been performing well. Despite the availability of research materials and databases,
she uses her own experience to make acquisitions because she is usually very

confident about the success of her plans. This attitude of Stacy can be termed
_____.
A. hubris
B. selfishness
C. solipsism
D. megalomania
Answer: A
33. Amber Corp., a jute manufacturing company, wants to diversify into the food
industry. In order to do so, the board of directors decides to move some of its
existing resources, expertise, and technology to set the base of the food unit. The
market analysts at Amber predict that this unit has a high growth potential. Thus,
rather than leaving the new food unit to grow on its own, the board decides to invest
in it as it this will help increase the corporate value of the company. In this scenario,
Amber Corp. is trying to create value by acting as a(n) _____.
A. adjacent market
B. internal capital market
C. external capital market
D. related-constrained market
Answer: B
34. A company called Techno Plus LLC experienced a failed acquisition, but the
managers of the company were hesitant to end the venture as they had already
invested too much time, finances, and effort into it. They presumed that everything
would work out with a little more money and time. This attitude of the managers of
Techno Plus LLC can be termed _____.
A. hubris
B. arrogance
C. positive thinking
D. sunk cost fallacy
Answer: D

35. Lee, the CEO of Libra Inc., decided that the best way to diversify this food
processing company would be to set up its own small-scale beverage producing unit
in a new area where its new products would have high demands. This decision by
Lee best reflects a(n)_____.
A. acquisition
B. greenfield entry
C. brownfield entry
D. merger
Answer: B
Section reference: Methods of Diversification
36. Neon Colors Corp., a well-established apparel industry, increased its corporate
value by purchasing a footwear company as part of its growth strategy. It purchased
the footwear company because developing its own operations and processes would
be expensive and time consuming. This is an example of a(n) _____.
A. merger
B. brownfield entry
C. acquisition
D. greenfield entry
Answer: C
37. In order to successfully carry out an acquisition, the managers at Pink Inc. prepared
a list of potential target companies that it could purchase. In the next step, the
managers evaluated each prospective company in depth to understand their methods
of operations, processes, procedures, strengths, and limitations in order to choose

the best target company. This process of evaluating the companies is best known as
_____.
A. due diligence
B. market intelligence
C. consultation
D. market evaluation
Answer: A
Section reference: The Acquisition and Integration Process
38. Blue Work LLC, a software company, purchased an electronics and electrical
company and implemented its resources and technologies in the target company.
Blue Work changed the entire culture and brand of the target company and
introduced its own culture such that the identity of the target company disappeared.
Blue Work benefitted from this acquisition and witnessed a significant growth. This
type of acquisition is known as a _____.
A. greenfield entry
B. takeover
C. union
D. merger
Answer: B
39. BestBrew Corp. and True Coffee Inc. were two leading coffee manufacturing firms.
They united and created a whole new firm called True Brew Inc. that used the best
customer front-end and operational back-end processes of the two firms. This union
is an example of a _____.
A. brownfield entry
B. greenfield entry
C. takeover
D. merger
Answer: D

40. Two firms recently had a bolt-on acquisition. Martha, the managing director of one
of these firms, claims that an integration team is required to decide which tactical
elements and operational functions of the two firms should be strategically
integrated and implemented. She believes having this team will enable fair decisions
to be made, thus inculcating a friendly atmosphere in the new firm. Which of the
following statements strengthens Martha’s claim?
A. Having the team may consume the company’s time and effort, but in the long run,
it may help the company grow.
B. The team members of the two firms may be biased toward their own firms,
preventing fair implementation.
C. The team always makes sound decisions that are based on the integration
templates that managers in the acquiring firm choose.
D. The team helps in deciding which culture will be incorporated in the new entity.
Answer: D
Bloom’s: Analyze
AACSB: Reflective thinking
Fill in the blanks
41. In vertical integration, movement in the direction of raw materials is _____.
Answer: backward integration

42. A firm earning more than 95 percent of the revenues from a single line of business
is known as a _____.
Answer: single business


Short Answer
43. What are the mechanisms that help companies in exploiting and/or expanding their
resources and capabilities?
Answer: Exploiting and/or expanding the resources and capabilities usually come
through one of six mechanisms. A mnemonic device of the six Ss helps one
remember these important elements: employing slack, creating synergy, leveraging
shared knowledge, utilizing similar models for success, spreading human and
financial capital to its best use, or providing a stepping stone for the company to a
completely new business sector.
44. What does the term adjacent market mean?
Answer: An adjacent market is a market or industry that is closely related to markets

or industries a firm currently competes in. The adjacent market may mean selling the
firm’s existing products to new customer groups, bringing new products and services
to existing customers, or selling new products and services to new customers.
Section reference: Creating Value Through Diversification
45. How does diversification help exploit existing customer-facing resources?
Answer: Diversification allows companies to exploit their existing customer-facing

resources by adding new operational resources and capabilities.

Essay Questions
46. Explain the ways in which diversification adds value.
Answer: Diversification adds value when it allows the combined businesses to

deliver greater value and utility to new or existing customers than a firm could
without being diversified. Diversification also adds value if the combined businesses
reduce the firm’s overall cost of producing goods or services. Diversification adds
value when expansion into an adjacent business either exploits the firm’s core and
valuable resources and capabilities or diversification enhances and grows the
resource base. Diversification allows companies to exploit their existing customer-
facing resources by adding new operational resources and capabilities.
Diversification also creates value when it helps a company expand its existing set of
resources and capabilities or diversification enables it to prepare for the future.
47. What is a greenfield entry? When should a company use it?
Answer: A greenfield entry is defined as entry into an adjacent market by a firm that
opens its own operation. Greenfield entry makes sense, first and foremost, when
companies have the front-end and back-end resources and capabilities they can
immediately exploit to create value. Greenfield also makes sense when companies
can afford to enter new arenas slowly and at small to moderate investment.
48. What are the two challenges related to acquisition premium that an acquiring firm
faces when acquiring a target firm?
Answer: Acquirers must pay a premium to acquire a target; the premium represents a
bet by the acquirer on its ability to create value through the acquisition. The
acquisition premium creates two challenges for the acquiring firm. First, the larger
the premium, the more value they must actually create to justify the acquisition.
Second, given the time value of money, the larger the premium, the quicker the
acquirer must create that value.

49. How does a related-constrained diversification differ from a related-linked

diversification?
Answer: A related-constrained diversification occurs when a firm earns less than 70

percent of its revenue from its main line of business and its other lines of business
share product, technological, and distribution linkages with the main business. A
related-linked diversification occurs when a firm operates in related markets, but
fewer linkages exist between the new and existing markets than the elements create
separately.
50. Mention the factors that lead to destroying value through diversification. Explain
any three of them.
Answer: Value usually gets destroyed in one of five ways: excessive pride; sunk cost
fallacy; imitative diversification; poor governance and incentives; or the lack of
resource commonality between the lines of business. (Students’ answers may vary.)
Hubris: Managers may diversify based on their own beliefs about the potential of
their company’s ability to create value in the adjacent market. Hubris is an ancient
Greek word for excessive pride, arrogance, or overconfidence. Managers act with
hubris when they diversify or make acquisitions based on their own experience or
their gut feelings rather than on solid data and research.
Sunk Cost Fallacy: Closely related to hubris as a reason why diversification fails is
the sunk cost fallacy, whereby managers believe that their investment in a failed
acquisition just needs more incremental investment in order to succeed. Executives
are often reluctant to abandon a project in which they have already invested so much
time and capital; they often move forward under the assumption that things will turn
around with a little more investment.
Imitation: Managers sometimes feel pressure to diversify their corporation when a
competitor diversifies first. The competitor has done due diligence and selected an
attractive target for acquisition, or made a greenfield entry after careful research and
planning. Caught off-guard, a firm might quickly look for a similar acquisition target
or hurry to create a similar line of business. In their rush to respond, managers fail to
consider how attractive the target really is, or if they have the resources and
capabilities that make the new market a value adding adjacency.


Strategic Management Concepts and Cases 1st Edition Dyer Test Bank Download

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Strategic Management Concepts and Cases 1st Edition Dyer Test Bank Download

Uploaded by

Copyright:

Available Formats

Test Bank for Strategic Management Concepts

and Cases 1st Edition Dyer Godfrey Jensen Bryce

Download full test bank at:

Chapter 6: Corporate Strategy

Multiple Choice Questions

Copyright ©2016 John Wiley & Sons, Inc.

3. Rest & Sleep Inc. is a mattress manufacturing firm. By manufacturing related

Copyright ©2016 John Wiley & Sons, Inc.

6. Pisces Corp. is an apparel manufacturing company. It purchased a few of its raw

7. Markus United Inc., a soap manufacturing company, maintained strategic advantage

Copyright ©2016 John Wiley & Sons, Inc.

Copyright ©2016 John Wiley & Sons, Inc.

12. Which of the following statements is true of a corporate strategy?

13. Which of the following is an example of a horizontal diversification?

Copyright ©2016 John Wiley & Sons, Inc.

16. Which of the following statements is true of a dominant vertical business?

Copyright ©2016 John Wiley & Sons, Inc.

Copyright ©2016 John Wiley & Sons, Inc.

Copyright ©2016 John Wiley & Sons, Inc.

Copyright ©2016 John Wiley & Sons, Inc.

Copyright ©2016 John Wiley & Sons, Inc.

Copyright ©2016 John Wiley & Sons, Inc.

Copyright ©2016 John Wiley & Sons, Inc.

Copyright ©2016 John Wiley & Sons, Inc.

Copyright ©2016 John Wiley & Sons, Inc.

Copyright ©2016 John Wiley & Sons, Inc.

Fill in the blanks

41. In vertical integration, movement in the direction of raw materials is _____.

Answer: backward integration

Answer: single business

Copyright ©2016 John Wiley & Sons, Inc.

44. What does the term adjacent market mean?

Answer: An adjacent market is a market or industry that is closely related to markets

45. How does diversification help exploit existing customer-facing resources?

Answer: Diversification allows companies to exploit their existing customer-facing

Copyright ©2016 John Wiley & Sons, Inc.

46. Explain the ways in which diversification adds value.

Answer: Diversification adds value when it allows the combined businesses to

47. What is a greenfield entry? When should a company use it?

Copyright ©2016 John Wiley & Sons, Inc.

49. How does a related-constrained diversification differ from a related-linked

Answer: A related-constrained diversification occurs when a firm earns less than 70

Copyright ©2016 John Wiley & Sons, Inc.

Copyright ©2016 John Wiley & Sons, Inc.

You might also like