MNGT 4800 Final Exam Questions With Correct Answers

MNGT 4800 Final Exam Questions With Correct Answers Business Strategy asks the question . . . - answerhow to compete in a single product market Concentration Strategies refers to - answeractions firms use to compete in a single industry 3 types of concentration strategies - answermarket penetration, market development, and product development Market Penetration - answerattempt to gain additional market share in an existing market using existing products Market Development - answerattempting to sell existing products in new markets (either entering a new retail channel or new geographic region) Product Development - answerrefers to the creation of new products to serve existing markets Horizontal Integration - answeran attempt to pursue a concentration strategy by acquiring or merging with a rival Acquisition - answerdescribes the purchase or takeover of one company by another Merger - answerdescribes the joining of two independent companies to form a combined entity Sources of Value Creation Advantages - answer- reduction in competitive intensity - positively effects several Porter's forces - lower costs - increased differentiation Reduction in Competitive Intensity - answersurviving firms focus less on price competition, possibly increasing profitability Positively effects several Porter's forces - answerreduces power of buyers and suppliers, the threat of firm entry, and rivalry among existing competitors Lower costs - answerfirms can lower costs through increased economies of scale Increased differentiation - answercan help firms fill gaps in their products and service offerings Sources of Cost Advantages - answer- Integration failure - Reduced flexibility - Increased potential for legal trouble Integration Failure - answeroften difficult to integrate two organizations with potentially different strategies and structures Reduced Flexibility - answerAs size increases, it becomes more difficult for firms to respond to changes in the environment Increased potential for legal trouble - answeras firms increased in market share, there is increased scrutiny by federal anti - trust organizations In most cases, M&As DO NOT create a competitive advantage - answer- most mergers destroy shareholder value because anticipated synergies never materialize - the potential value created is often assumed within the price of the acquisition - escalation of commitment can be another problem Sometimes companies get swept up in a bidding war for an acquisition which results in - answerwinner's curse Confirmation bias - answerselectively searching for information that confirms one's ideas about an event Why do firms engage in M&A? - answer- principle - agent problems - the desire to overcome competitive disadvantage - superior acquisition and integration capability Principle - agent problems - answerincentives such as higher pay/benefits, increased power/prestige may get managers to grow the firm using M&A The desire to overcome competitive disadvantage - answerthis can allow companies to gain a competitive advantage (to compete with nike, adidas acquired reekbok) Superior acquisition and Integration Capability - answerSome firms are consistently able to identify, acquire, and integrate target companies to strengthen their competitive positions. Vertical Integration - answerinvolves expanding into a new portion of the industry value chain