Question 1

Firms that engage in product-related diversification as well as far-flung multinational expansion are following a classic conglomerate strategy.

Accepted Answer

A) True 
 B)False

Question 2

Interest in conglomerates has declined in emerging economies due to their developed capital markets.

Accepted Answer

A) True 
 B)False

Question 3

The mechanisms needed to obtain financial synergy in diversification are the same as those needed to obtain operational synergy.

Accepted Answer

A) True 
 B)False

Question 4

In general, the costs associated with doing business abroad but maintaining product-related diversification are:

Accepted Answer

A)  ​Greater than the costs of managing a conglomeration while mostly staying at home.
B)  ​Less than the costs of managing a conglomeration while mostly staying at home.
C)   ​About the same as the costs of managing a conglomeration while mostly staying at home.
D)   ​Greater than the costs for all other combinations of geographic and product scope.E) All of the above
F) A) and D)

Question 5

To improve the odds for success with its acquisitions, a firm should:

Accepted Answer

A)  ​Engage its rivals in a bidding war.
B)  ​Look for potential firms with high acquisition premiums.
C)   ​Conduct due diligence concerning strategic and organizational fit.
D)   ​Only acquire after participating in an alliance first.E) B) and C)
F) None of the above

Question 6

Research regarding the relationship between product diversification and firm performance indicates that:

Accepted Answer

A)  Putting your eggs in similar baskets," has emerged as a balanced way to both reduce risk and leverage synergy.
B)  Performance may decrease as firms change from product-related to -unrelated.
C)   The linkage between diversification and performance is inverted U shaped.
D)   All of the above.E) C) and D)
F) B) and D)

Question 7

By the 1980s MBC began to decrease.

Accepted Answer

A) True 
 B)False

Question 8

Gaining access to complementary resources is an institution-based motivation for acquisitions.

Accepted Answer

A) True 
 B)False

Question 9

With _________ M&As, Firm A, which is a gas and oil company, acquires a chemical company, a transportation company, and a financial services company.

Accepted Answer

A)  ​Horizontal.
B)  ​Vertical.
C)   ​Conglomerate.
D)   ​Hostile.E) B) and C)
F) A) and B)

Question 10

Which of the following is TRUE regarding restructuring?

Accepted Answer

A)  The two primary ways of restructuring are downsizing and upsizing.
B)  Restructuring (downsizing)  is used more often by acquiring firms than by seller firms.
C)   Corporate restructuring is the primary tool for reducing firm size and scope.
D)   Restructuring is easier in knowledge-intensive firms than capital intensive firms.E) All of the above
F) A) and B)

Question 11

For definitional purposes, mergers and acquisitions are exactly the same thing.

Accepted Answer

A) True 
 B)False

Question 12

Which is not true regarding geographic diversification and firm performance?

Accepted Answer

A)  U-shaped relationship at low level of internationalization.
B)  Initially a negative effect of international expansion on performance.
C)   Inverted-U shape at moderate to high levels of internationalization.
D)   Positive only at high levels of internationalization.E) A) and C)
F) A) and B)

Question 13

In combining product and geographic diversification, which is not one of the four possible combinations?

Accepted Answer

A)  Anchored replicators.
B)  Multinational replicators.
C)   Far-flung conglomerates.
D)   Classic replicators.E) B) and C)
F) C) and D)

Question 14

Which of the following statements is TRUE?

Accepted Answer

A)  ​Diversification creates value in all circumstances.
B)  ​Diversification can create value by leveraging certain core competencies and capabilities.
C)   ​Compared with diversified firms, non-diversified single-business firms are better able to spread risk.
D)   ​Firms that undertake acquisitions have mastered the art of post-acquisition integration.E) C) and D)
F) All of the above

Question 15

Cross-border M&As:

Accepted Answer

A)  ​Are rare.
B)  ​Have increased in the past 20 years.
C)   ​Have decreased in the past 20 years.
D)   ​Consist mainly of mergers rather than acquisitions.E) B) and C)
F) A) and C)

Question 16

Which of the following is the most likely reason Firm A would decide to forgo an acquisition and pursue an alliance instead?

Accepted Answer

A)  ​It wants learning opportunities without long-term commitment.
B)  ​It wants greater control of day-to-day operations.
C)   ​It wishes to engage in a long-term enduring relationship.
D)   ​It wishes to consolidate market power, reduce risks, and leverage economies of scope.E) None of the above
F) A) and B)

Question 17

High entry barriers often result in green-field entries as opposed to acquisitions.

Accepted Answer

A) True 
 B)False

Question 18

A nondiversified single-business firm faces less risk than a diversified firm.

Accepted Answer

A) True 
 B)False

Question 19

Operational synergy is a primary goal of product-unrelated diversification.

Accepted Answer

A) True 
 B)False

Question 20

The manager of Firm X watches the manager of a competing firm (Firm Y)  successfully pursue some vertical integration up the supply chain; Firm A's manager immediately begins acquiring companies in its supply chain. At first glance, the manager's motives appear to be:

Accepted Answer

A)  ​Synergistic.
B)  ​Risk reducers.
C)   ​Hubris.
D)   ​Self-interest.E) A) and C)
F) A) and B)

Exam 9: Diversifying, Acquiring, and Restructuring

Interest in conglomerates has declined in emerging economies due to their developed capital markets.

Correct AnswerverifiedShow Answer

In combining product and geographic diversification, which is not one of the four possible combinations?

Correct AnswerverifiedShow Answer

By the 1980s MBC began to decrease.

Correct AnswerverifiedShow Answer

Research regarding the relationship between product diversification and firm performance indicates that:

Correct AnswerverifiedShow Answer

The manager of Firm X watches the manager of a competing firm (Firm Y) successfully pursue some vertical integration up the supply chain; Firm A's manager immediately begins acquiring companies in its supply chain. At first glance, the manager's motives appear to be:

Correct AnswerverifiedShow Answer

Gaining access to complementary resources is an institution-based motivation for acquisitions.

Correct AnswerverifiedShow Answer

Which of the following is TRUE regarding restructuring?

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

For definitional purposes, mergers and acquisitions are exactly the same thing.

Correct AnswerverifiedShow Answer

With _________ M&As, Firm A, which is a gas and oil company, acquires a chemical company, a transportation company, and a financial services company.

Correct AnswerverifiedShow Answer

High entry barriers often result in green-field entries as opposed to acquisitions.

Correct AnswerverifiedShow Answer

Operational synergy is a primary goal of product-unrelated diversification.

Correct AnswerverifiedShow Answer

Firms that engage in product-related diversification as well as far-flung multinational expansion are following a classic conglomerate strategy.

Correct AnswerverifiedShow Answer

A nondiversified single-business firm faces less risk than a diversified firm.

Correct AnswerverifiedShow Answer

Which of the following is the most likely reason Firm A would decide to forgo an acquisition and pursue an alliance instead?

Correct AnswerverifiedShow Answer

In general, the costs associated with doing business abroad but maintaining product-related diversification are:

Correct AnswerverifiedShow Answer

The mechanisms needed to obtain financial synergy in diversification are the same as those needed to obtain operational synergy.

Correct AnswerverifiedShow Answer

Cross-border M&As:

Correct AnswerverifiedShow Answer

Which is not true regarding geographic diversification and firm performance?

Correct AnswerverifiedShow Answer

To improve the odds for success with its acquisitions, a firm should:

Correct AnswerverifiedShow Answer

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