Corporate venturing through internal development is appealing when the company

already has the resources & capabilities required

The ‘cost of entry’ test states all of the following, except that the:

entry cost into an existing business is always significant

Related businesses are those that possess:

Common factors in cross-business value chain activities

To evaluate a diversified company’s strategy involves assessing all except:

the original company strategy & corporate performance

'Strategic Fit' is when value chains of businesses are sufficiently similar to allow all except

no requirement for sharing or transfer of resources

A company can consider diversifying except when:

there are plenty of opportunities in the present industry

The ‘better off’ test states that existing and new businesses must offer potential to:

perform better together than as standalone businesses

Transaction costs are the costs of:

completing a business agreement in excess of the deal price

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BS Ch 8 Corporate Strategy

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Corporate Strategy and the case for related and unrelated diversification

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Questions 12

Answers

1
Corporate venturing through internal development is appealing when the company
has little time to launch the business
would create oversupply if it added more production capacity
has Internal costs of entry higher than acquisition costs
already has the resources & capabilities required
2
The ‘cost of entry’ test states all of the following, except that the:
more attractive businesses have higher likely entry barriers
growth companies expect sale price to reflect future growth
entry cost into an existing business is always significant
more attractive a business the higher the likely entry cost
3
Related businesses are those that possess:
Dissimilar value chains
All of these factors
Common factors in cross-business value chain activities
No common factors in resource requirements
4
To evaluate a diversified company’s strategy involves assessing all except:
the original company strategy & corporate performance
the attractiveness of newly acquired diversified industries
the extent of cross-business strategic fit
if the firms resources & capabilities match the requirements
5
'Strategic Fit' is when value chains of businesses are sufficiently similar to allow all except
transfer of knowledge between businesses
sharing of resources between businesses
no requirement for sharing or transfer of resources
transfer of resources between businesses
6
Misguided (i.e. badly thought out) reasons for diversification include all except:
Perceived risk reduction
Growth at the expense of shareholder value
Stabilisation
Adding shareholder value
7
Corporate venturing is all except:
Intrapreneurship
Corporate entrepreneurship
Corporate parenting
New Venture Development
8
A company can consider diversifying except when:
the industry is mature & opportunities for growth are rare
new technologies threaten the company’s business model
there are plenty of opportunities in the present industry
buyer demand in their core markets is flat or declining
9
The main drawbacks (disadvantages) of unrelated diversification include:
Limited potential for gaining competitive advantage
All of these factors
Shareholder pressure to sustain or increase earnings
Demanding management requirements
10
The ‘better off’ test states that existing and new businesses must offer potential to:
perform better together than as standalone businesses
add shareholder value above the normal industry level
make returns for shareholders and other stakeholders
add shareholder value soon after acquisition or merger
11
Transaction costs are the costs of:
the transaction
completing a business agreement in excess of the deal price
gaining market share
the merger or acquisition
12
To add shareholder value, diversification into a new business must pass:
The ‘better off’ test
The ‘industry attractiveness’ test
The ‘cost of entry’ test
All of these

BS Ch 8 Corporate Strategy Flashcards | StudBud