MGMT 449 FINAL EXAM QUESTIONS
AND ANSWERS GRADED A+ 2025/2026
Corporate Level Strategy - ANS What businesses should a corporation compete in? How can
these businesses be managed so they create "synergy"?
Synergy - ANS Create more value by working together than if they were freestanding units.
Stronger if we combine our forces.
Reasons for Diversification Failures - ANS Acquisitions destroy value by: Paying a premium to
the target firm; Failing to integrate the activities of the newly acquired businesses into the
corporate family; Undertaking diversification initiatives that are too easily imitated by the
competition.
Paying a premium to the target firm - ANS Premium is not in the buyers' interest as much as
the target firm
How can creating a synergy be bad - ANS If the company being bought is changing too much
Diversification - ANS Initiatives must create value for shareholders through: Mergers and
acquisitions; Strategic alliances; Joint ventures; Internal development
The process of firms expanding their operations by entering new businesses
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Diversification should create synergy - ANS Business 1 plus Business 2 equals more than two
Mergers and Acquisitions - ANS Rarely do well
Mergers - ANS Combine together (might create a monopoly); both companies are strong and
Board of Directors are strong too, big corporations; Involve a combination or consolidation of
two firms to form a new legal entity, On a relatively equal basis, Are relatively rare
The combining of two or more firms into one new legal entity
Acquisitions - ANS One company buys the other one; Involve one firm buying another either
through stock purchase, cash, or the issuance of debt; The more you finance an acquisition, the
more debt the firm has so cash goes to paying it off
The incorporation of one firm into another through purchase
Strategic Alliance - ANS Two companies or more agreeing to work together (temporary) to
gain market power.
A cooperative relationship between two or more firms
Joint Venture - ANS Agreeing to work on a product together, the starting of a third corporate
entity
New entities formed within a strategic alliance in which two or more firms, the parents,
contribute equity to form the new legal entity
Internal Development - ANS Develop products faster but need to grow first; Corporate
entrepreneurship and new venture internal development motives: No need to share the wealth
with alliance partners, No need to face difficulties associated with combining activities across
the value chains, No need to merge diverse corporate cultures, No need for external funding for
new development; Limitations: Time-consuming, Need to continually develop new capabilities
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Entering a new business through investment in new facilities, often called corporate
entrepreneurship and new venture development
Related Businesses - ANS Sharing businesses; Disney acquiring Pixar; Benefits derive from
horizontal relationships; Sharing intangible resources such as core competencies in marketing;
Sharing tangible resources such as production facilities, distribution channels via vertical
integration
A firm entering a different business in which it can benefit from leveraging core competencies,
sharing activities, or building market power
Unrelated Businesses - ANS Benefits derive from hierarchical relationships; Amazon, G.E;
Value creation derived from the corporate office; Leveraging support activities in the value chain
A firm diversifies into .... businesses - ANS Related and Unrelated
Related Diversification - ANS Enables a firm to benefit from horizontal relationships across
different businesses; Apple (Phone, Computer), Gas stations (0,1, Snacks); Economies of Scope;
Related businesses gain market power
Economies of Scope (Leveraging Core Competencies and Sharing Activities) and Market Power
(Pooled Negotiating Power and Vertical Integration)
Economies of Scope - ANS Allow businesses to: Leverage core competencies, Sharing related
activities, Enjoy greater revenues, enhance differentiation
Cost savings from leveraging core competencies or sharing related activities among businesses
in a corporation
Core Competencies - ANS Something a business does better, specialty; Reflect the collective
learning in organizations. Can lead to the creation of value and synergy if: They create superior
customer value, The value-chain elements in separate businesses require similar skills, They are
difficult for competitors to imitate or find substitutes for
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, A firm's strategic resources that reflect the collective learning in the organization
Related businesses gain market power by - ANS Pooled negotiating power; Vertical
integration
Pooled Negotiating Power - ANS Saying you have something that can benefit others; Gaining
greater bargaining power with suppliers and customers
The improvement in bargaining position relative to suppliers and customers
Sharing Related Activities - ANS Corporations can also achieve synergy by sharing activities
across their business units. Sharing tangible and value-creating activities can provide payoffs;
Cost savings through elimination of jobs, facilities and related expenses, or economies of scale;
Revenue enhancements through increased differentiation and sales growth; Having significant
lost in order to keep growing
Having activities of two or more businesses' value chains done by one of the businesses
Market Power - ANS Can lead to the creation of value and synergy through: Pooled
negotiating power, Vertical integration
Firms' abilities to profit through restricting or controlling supply to a market or coordinating
with other firms to reduce investment
Vertical Integration - ANS A firm becomes its own supplier or distributor through: Backward
integration, Forward integration; Carpeting made by a company and sold through a distributor;
Corporation doesn't have much competency in this area
An expansion or extension of the firm by integrating preceding or successive production
processes
Vertical Integration Issues - ANS Is the company satisfied with the quality of the value that its
present suppliers and distributors are providing? Are there activities in the industry value chain
presently being outsourced or performed independently by others that are a viable source of
4 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
AND ANSWERS GRADED A+ 2025/2026
Corporate Level Strategy - ANS What businesses should a corporation compete in? How can
these businesses be managed so they create "synergy"?
Synergy - ANS Create more value by working together than if they were freestanding units.
Stronger if we combine our forces.
Reasons for Diversification Failures - ANS Acquisitions destroy value by: Paying a premium to
the target firm; Failing to integrate the activities of the newly acquired businesses into the
corporate family; Undertaking diversification initiatives that are too easily imitated by the
competition.
Paying a premium to the target firm - ANS Premium is not in the buyers' interest as much as
the target firm
How can creating a synergy be bad - ANS If the company being bought is changing too much
Diversification - ANS Initiatives must create value for shareholders through: Mergers and
acquisitions; Strategic alliances; Joint ventures; Internal development
The process of firms expanding their operations by entering new businesses
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Diversification should create synergy - ANS Business 1 plus Business 2 equals more than two
Mergers and Acquisitions - ANS Rarely do well
Mergers - ANS Combine together (might create a monopoly); both companies are strong and
Board of Directors are strong too, big corporations; Involve a combination or consolidation of
two firms to form a new legal entity, On a relatively equal basis, Are relatively rare
The combining of two or more firms into one new legal entity
Acquisitions - ANS One company buys the other one; Involve one firm buying another either
through stock purchase, cash, or the issuance of debt; The more you finance an acquisition, the
more debt the firm has so cash goes to paying it off
The incorporation of one firm into another through purchase
Strategic Alliance - ANS Two companies or more agreeing to work together (temporary) to
gain market power.
A cooperative relationship between two or more firms
Joint Venture - ANS Agreeing to work on a product together, the starting of a third corporate
entity
New entities formed within a strategic alliance in which two or more firms, the parents,
contribute equity to form the new legal entity
Internal Development - ANS Develop products faster but need to grow first; Corporate
entrepreneurship and new venture internal development motives: No need to share the wealth
with alliance partners, No need to face difficulties associated with combining activities across
the value chains, No need to merge diverse corporate cultures, No need for external funding for
new development; Limitations: Time-consuming, Need to continually develop new capabilities
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Entering a new business through investment in new facilities, often called corporate
entrepreneurship and new venture development
Related Businesses - ANS Sharing businesses; Disney acquiring Pixar; Benefits derive from
horizontal relationships; Sharing intangible resources such as core competencies in marketing;
Sharing tangible resources such as production facilities, distribution channels via vertical
integration
A firm entering a different business in which it can benefit from leveraging core competencies,
sharing activities, or building market power
Unrelated Businesses - ANS Benefits derive from hierarchical relationships; Amazon, G.E;
Value creation derived from the corporate office; Leveraging support activities in the value chain
A firm diversifies into .... businesses - ANS Related and Unrelated
Related Diversification - ANS Enables a firm to benefit from horizontal relationships across
different businesses; Apple (Phone, Computer), Gas stations (0,1, Snacks); Economies of Scope;
Related businesses gain market power
Economies of Scope (Leveraging Core Competencies and Sharing Activities) and Market Power
(Pooled Negotiating Power and Vertical Integration)
Economies of Scope - ANS Allow businesses to: Leverage core competencies, Sharing related
activities, Enjoy greater revenues, enhance differentiation
Cost savings from leveraging core competencies or sharing related activities among businesses
in a corporation
Core Competencies - ANS Something a business does better, specialty; Reflect the collective
learning in organizations. Can lead to the creation of value and synergy if: They create superior
customer value, The value-chain elements in separate businesses require similar skills, They are
difficult for competitors to imitate or find substitutes for
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, A firm's strategic resources that reflect the collective learning in the organization
Related businesses gain market power by - ANS Pooled negotiating power; Vertical
integration
Pooled Negotiating Power - ANS Saying you have something that can benefit others; Gaining
greater bargaining power with suppliers and customers
The improvement in bargaining position relative to suppliers and customers
Sharing Related Activities - ANS Corporations can also achieve synergy by sharing activities
across their business units. Sharing tangible and value-creating activities can provide payoffs;
Cost savings through elimination of jobs, facilities and related expenses, or economies of scale;
Revenue enhancements through increased differentiation and sales growth; Having significant
lost in order to keep growing
Having activities of two or more businesses' value chains done by one of the businesses
Market Power - ANS Can lead to the creation of value and synergy through: Pooled
negotiating power, Vertical integration
Firms' abilities to profit through restricting or controlling supply to a market or coordinating
with other firms to reduce investment
Vertical Integration - ANS A firm becomes its own supplier or distributor through: Backward
integration, Forward integration; Carpeting made by a company and sold through a distributor;
Corporation doesn't have much competency in this area
An expansion or extension of the firm by integrating preceding or successive production
processes
Vertical Integration Issues - ANS Is the company satisfied with the quality of the value that its
present suppliers and distributors are providing? Are there activities in the industry value chain
presently being outsourced or performed independently by others that are a viable source of
4 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
