MAN4631 Global Strategy and Policy
Chapter 6 Review questions.
Name _________________Points ___________Grade_____
1. Whenever an organization diversifies, it represents investing a stockholder's funds in a way in which the individual investor is unable. True (p. 198)
2. When firms diversify into unrelated businesses, the primary potential benefits are horizontal relationships, i.e., businesses sharing tangible and intangible resources. False (p. 198)
3. Similar businesses working together or the affiliation of a business with a strong parent can strengthen a firm's bargaining position relative to suppliers and customers. True (p. 203 – 204)
4. A publishing company that purchases a chain of bookstores to sell its books is an example of unrelated diversification. True (p. 206)
5. One of the risks of vertical integration is that there may be problems associated with unbalanced capacities or unfilled demands along a firm's value chain. True (p. 206 - 207)
6. Vertical integration is attractive when market transaction costs are higher than internal administrative costs. True (p. 208)
7. According to the text, the two main sources of synergy in unrelated diversification are parenting and financial synergies via portfolio management. False (p. 209 - 211)
8. Portfolio management should be considered as the primary basis for formulating corporate-level strategies. True (p. 211)
9. An advantage of mergers and acquisitions is that they can enable a firm to rapidly enter new product markets. True False (p. 215 - 216)
10. A golden parachute is a prearranged contract with managers specifying that in the event of a hostile takeover, the target firm's managers will be paid a significant severance package. True (p. 225)
11. The potential advantages of strategic alliances and joint ventures include entering new markets as well as developing and diffusing...