MBA 705 - Minsun Kim Exam 3 UPDATED ACTUAL Questions And Correct
Answers
C
Terms in this set (47)
Corporate-level strategy highest level of decision formulated by the highest level of management team
(CEO and top managers) of the company
CEOS and top managers ask questions such as - which business unit(s) should we have?
-How should we support and enhance the value of each business as a whole?
Business Unit Managers ask questions such as -How individual business units compete and win in their own individual market?
Operational managers ask questions such as How to improve the effectiveness and efficiencies of operations?
What are the Three Corporate Level Strategies? Growth Strategy (increase in size)
Stability Strategy (Retain current size)
Retrenchment strategy (decrease in size)
Internal Growth accomplished when a firm increases its revenues, production capacity, and
workforce
External Growth when two firms merge or one acquires the other
Acquisition a form of merger whereby one firm purchases another, often with a combination
of cash and stock
Merger occurs when two or more firms, usually of roughly similar sizes, combine into one
through an exchange of stock
Shortcoming of a merger or acquisition 1. The acquiring firm pays a premium
2. Top managers of the acquired firm often depart the organization
3. Building a common culture after layoffs can be complicated
Five forms of External Growth 1. Horizontal integration
2. Horizontal related diversification
3. Conglomerate (unrelated) diversification
4. Vertical integration
5. Strategic Alliances
Horizontal (related) integration When a firm acquires other companies in the same line of business. Doing so
allows a firm operating in a single industry to grow rapidly without moving into
other industries
, Horizontal (Related) Diversification When a firm acquires a business outside its present scope of operation, but with
similar or related core competencies, the firm's key capabilities and collective
learning skills that are fundamental to its strategy, performance, and long-term
profitability.
e.g. McDonald's diversified their menu selection, diversified in areas that are
related on some basic variable. The 3 menu items share common resources and
common customer segments
Why does a company pursue the horizontal (related) It is because it can create synergy using the same supplies and resources, the
diversification? same marketing and distribution channels, and advertising multiple services
simultaneously
Conglomerate (unrelated) diversification When a corporation acquires a business in an unrelated industry to reduce
cyclical fluctuations in cash flows or revenues
-it can increase complexity and requires managers to understand each of the core
technologies and special requirements of the individual units. This often reduces
the effectiveness of management
Vertical Integration merging various stages of activities in the distribution channel. Includes:
Forward integration
Backward integration
Backward Integration when a firm acquires its suppliers (i.e., expanding "upstream")
Forward Integration when a firm acquires its buyers (i.e., expanding "downstream")
Strategic Alliances (Partnerships) occur when two or more firms agree to share the costs, risks, and benefits
associated with pursuing new business opportunities
Advantage of a Strategic Alliance - it minimizes increases in the organizational bureaucracy
-It allows a firm to share in the benefits of the alliance without bearing all of the
costs
Stability Strategy attempts to maintain the present size and scope of operations
Stability strategy may be more attractive than growth 1. Industry growth is slow or non-existent
strategy when: 2. Costs associated with growth exceed its benefits
3. Growth may place great constraints on quality, marketing efforts, and customer
service
4. There is an increased competitive pressure associated with growth
Answers
C
Terms in this set (47)
Corporate-level strategy highest level of decision formulated by the highest level of management team
(CEO and top managers) of the company
CEOS and top managers ask questions such as - which business unit(s) should we have?
-How should we support and enhance the value of each business as a whole?
Business Unit Managers ask questions such as -How individual business units compete and win in their own individual market?
Operational managers ask questions such as How to improve the effectiveness and efficiencies of operations?
What are the Three Corporate Level Strategies? Growth Strategy (increase in size)
Stability Strategy (Retain current size)
Retrenchment strategy (decrease in size)
Internal Growth accomplished when a firm increases its revenues, production capacity, and
workforce
External Growth when two firms merge or one acquires the other
Acquisition a form of merger whereby one firm purchases another, often with a combination
of cash and stock
Merger occurs when two or more firms, usually of roughly similar sizes, combine into one
through an exchange of stock
Shortcoming of a merger or acquisition 1. The acquiring firm pays a premium
2. Top managers of the acquired firm often depart the organization
3. Building a common culture after layoffs can be complicated
Five forms of External Growth 1. Horizontal integration
2. Horizontal related diversification
3. Conglomerate (unrelated) diversification
4. Vertical integration
5. Strategic Alliances
Horizontal (related) integration When a firm acquires other companies in the same line of business. Doing so
allows a firm operating in a single industry to grow rapidly without moving into
other industries
, Horizontal (Related) Diversification When a firm acquires a business outside its present scope of operation, but with
similar or related core competencies, the firm's key capabilities and collective
learning skills that are fundamental to its strategy, performance, and long-term
profitability.
e.g. McDonald's diversified their menu selection, diversified in areas that are
related on some basic variable. The 3 menu items share common resources and
common customer segments
Why does a company pursue the horizontal (related) It is because it can create synergy using the same supplies and resources, the
diversification? same marketing and distribution channels, and advertising multiple services
simultaneously
Conglomerate (unrelated) diversification When a corporation acquires a business in an unrelated industry to reduce
cyclical fluctuations in cash flows or revenues
-it can increase complexity and requires managers to understand each of the core
technologies and special requirements of the individual units. This often reduces
the effectiveness of management
Vertical Integration merging various stages of activities in the distribution channel. Includes:
Forward integration
Backward integration
Backward Integration when a firm acquires its suppliers (i.e., expanding "upstream")
Forward Integration when a firm acquires its buyers (i.e., expanding "downstream")
Strategic Alliances (Partnerships) occur when two or more firms agree to share the costs, risks, and benefits
associated with pursuing new business opportunities
Advantage of a Strategic Alliance - it minimizes increases in the organizational bureaucracy
-It allows a firm to share in the benefits of the alliance without bearing all of the
costs
Stability Strategy attempts to maintain the present size and scope of operations
Stability strategy may be more attractive than growth 1. Industry growth is slow or non-existent
strategy when: 2. Costs associated with growth exceed its benefits
3. Growth may place great constraints on quality, marketing efforts, and customer
service
4. There is an increased competitive pressure associated with growth
