MIE 480 CH 10 EXAM QUESTIONS AND
ANSWERS GRADED A+ 2026
The three vignettes that open the chapter show that all merger and acquisition activity involves
companies buying businesses that are related to what they already do. - ANS false
Corporate strategy answers the question "What businesses should we be in?" while business
strategy answers the question "How should we compete in this business?" - ANS true
A strategic business unit is that part of a company charged with developing both business and
corporate strategy. - ANS false
The kinds of decisions typically made by those engaged in corporate strategy include
establishing business unit investment priorities, deciding which industries to enter and exit, and
making resource and management transfers. - ANS true
Diversified corporations are a significant part of the business landscape in the United States;
indeed, they comprise most of the Fortune 500 companies. - ANS true
In the 1960s and 1970s conglomerates were waning in number since many industries had de-
matured and were now ripe for organic growth. - ANS false
@COPYRIGHT 2026/2027 ALL RIGHTS RESERVED
1
, In the 1980s conglomerates began to shed unrelated businesses and leveraged buyouts (LBOs)
were one tool used to accomplish this. An LBO is when a company is bought primarily using
debt and often it is the managers of the company who buy it with the help of this financial tool.
- ANS true
A motive for diversification is that managers are aware that diversified firms always outperform
undiversified firms. - ANS false
The growth motivation for diversification is driven, in part, by the desire of managers to preside
over a larger firm. - ANS true
One of the benefits of market power (a reason for diversification) is that a firm can have more
influence with the EPA and other government agencies. - ANS false
Risk spreading as a reason for diversification involves attempts to reduce the unsystematic risk
that a firm experiences. - ANS true
Related diversification results from a merger or acquisition in which there is some similarity of
industry and/or value chain between the corporation and the company it seeks to acquire. -
ANS true
Horizontal diversification occurs when a merger or acquisition combines two companies that are
in different industries but share the same customers. - ANS false
Vertical diversification results from two companies combining to share supply chains. -
ANS false
@COPYRIGHT 2026/2027 ALL RIGHTS RESERVED
2
ANSWERS GRADED A+ 2026
The three vignettes that open the chapter show that all merger and acquisition activity involves
companies buying businesses that are related to what they already do. - ANS false
Corporate strategy answers the question "What businesses should we be in?" while business
strategy answers the question "How should we compete in this business?" - ANS true
A strategic business unit is that part of a company charged with developing both business and
corporate strategy. - ANS false
The kinds of decisions typically made by those engaged in corporate strategy include
establishing business unit investment priorities, deciding which industries to enter and exit, and
making resource and management transfers. - ANS true
Diversified corporations are a significant part of the business landscape in the United States;
indeed, they comprise most of the Fortune 500 companies. - ANS true
In the 1960s and 1970s conglomerates were waning in number since many industries had de-
matured and were now ripe for organic growth. - ANS false
@COPYRIGHT 2026/2027 ALL RIGHTS RESERVED
1
, In the 1980s conglomerates began to shed unrelated businesses and leveraged buyouts (LBOs)
were one tool used to accomplish this. An LBO is when a company is bought primarily using
debt and often it is the managers of the company who buy it with the help of this financial tool.
- ANS true
A motive for diversification is that managers are aware that diversified firms always outperform
undiversified firms. - ANS false
The growth motivation for diversification is driven, in part, by the desire of managers to preside
over a larger firm. - ANS true
One of the benefits of market power (a reason for diversification) is that a firm can have more
influence with the EPA and other government agencies. - ANS false
Risk spreading as a reason for diversification involves attempts to reduce the unsystematic risk
that a firm experiences. - ANS true
Related diversification results from a merger or acquisition in which there is some similarity of
industry and/or value chain between the corporation and the company it seeks to acquire. -
ANS true
Horizontal diversification occurs when a merger or acquisition combines two companies that are
in different industries but share the same customers. - ANS false
Vertical diversification results from two companies combining to share supply chains. -
ANS false
@COPYRIGHT 2026/2027 ALL RIGHTS RESERVED
2
