UARK MGMT 3013 EXAM 2 – LAUNDER
QUESTIONS WITH COMPLETE
ANSWERS
Business groups - Answer-large business organizations consisting of firms in diverse
industries interlinked by both formal and informal ties; largely in foreign countries
Conglomerates - Answer-a major corporation that includes a number of smaller
companies in unrelated industries
Motives for diversification - Answer-Organizational (historic low performance industry,
uncertain future cash flows, firm risk reduction); Managerial (compensation,
employment risk)
Restructuring - Answer-buying low performing firms; re-organize the firm and sell off
assets; implement -stringent accounting controls to improve performance in remaining
parts of firm; if firm becomes profitable, possible to sell; most effective in mature
industries
Resource commonality - Answer-extent to which the firm's tangible and intangible
resources compare favorably to a competitor's in terms of type and amount
Drivers of competitive behavior - Answer-awareness, motivation, ability
Cost - Answer-amount it takes to manufacture
Price - Answer-amount it sells for
Arenas in competitive dynamics - Answer-where competition occurs (Cost and Price,
Technology and Features)
First move advantages - Answer-customer loyalty, brand awareness, early market share
gains (scale advantages), tying up scale resources, learning curve advantages
Second move advantages - Answer-learn from mistakes, creative imitation, experience
in the market
Late move advantages - Answer-achieve considerably less success than first and
second movers, require considerable time to understand how to create at least as much
customer value as that offered by first and second movers
Learning curve - Answer-depiction that shows that at the beginning the cost per unit is
more and goes down and flattens as time goes on and improvements are made
, Predictors of likelihood of attack - Answer-market commonality, resource similarity,
awareness, motivation, ability, first-mover benefits, organizational size, quality
Corporate strategy - Answer-specifies action a firm takes to gain a competitive
advantage by selecting and managing a group of different businesses competing in
different product markets
Questions that corporate strategies answer - Answer-What industries are we in?
Vertical integration? What should be our geographic scope?
Diversification - Answer-scope of the markets and industries in which the firm competes;
how managers buy, create, and sell different businesses to match skills and strengths
with opportunities presented to the firm; company growth through starting up or
acquiring businesses outside the company's current products and markets
Types of diversification - Answer-low level, moderate to high level, very high level
Mergers - Answer-voluntary combination
of two companies operations,
assets, and financial transactions; done on a basis of equality
Acquisitions - Answer-combination
of two companies operations,
assets, and financial transactions; not done on a basis of equality; mutual consent
Takeovers - Answer-special type of acquisition when the target firm did not solicit the
acquiring firm's bid for outright ownership; without mutual consent
Reasons for acquisitions - Answer-Increase Market Power, Overcome Entry Barriers,
Cost of New Development/Increased Speed to Market, Lower Risk Compared to
Developing New Products, Increased Diversification, Reshaping Competitive Scope,
Learning and Developing New Capabilities, Access to new products/technologies,
Adopting a disruptive technology
Why do acquisitions fail? - Answer-integration difficulties, bad target
evaluations/assessments, firm becomes unwieldy, managerial conflict, loss of key
employees in acquired firms, large debt (paying too much), inability to achieve synergy,
too much diversification, too large, managers overly-focused on acquisitons
Effective acquisitions - Answer-Complementary Assets, Friendly Acquisition, Careful
Selection, Financial Slack, Low Debt, Sustained R & D, Experienced with Change
Different forms of restructuring - Answer-downsizing (shedding personnel and/or
facilities); downscoping (eliminating businesses that are unrelated to its core business);
QUESTIONS WITH COMPLETE
ANSWERS
Business groups - Answer-large business organizations consisting of firms in diverse
industries interlinked by both formal and informal ties; largely in foreign countries
Conglomerates - Answer-a major corporation that includes a number of smaller
companies in unrelated industries
Motives for diversification - Answer-Organizational (historic low performance industry,
uncertain future cash flows, firm risk reduction); Managerial (compensation,
employment risk)
Restructuring - Answer-buying low performing firms; re-organize the firm and sell off
assets; implement -stringent accounting controls to improve performance in remaining
parts of firm; if firm becomes profitable, possible to sell; most effective in mature
industries
Resource commonality - Answer-extent to which the firm's tangible and intangible
resources compare favorably to a competitor's in terms of type and amount
Drivers of competitive behavior - Answer-awareness, motivation, ability
Cost - Answer-amount it takes to manufacture
Price - Answer-amount it sells for
Arenas in competitive dynamics - Answer-where competition occurs (Cost and Price,
Technology and Features)
First move advantages - Answer-customer loyalty, brand awareness, early market share
gains (scale advantages), tying up scale resources, learning curve advantages
Second move advantages - Answer-learn from mistakes, creative imitation, experience
in the market
Late move advantages - Answer-achieve considerably less success than first and
second movers, require considerable time to understand how to create at least as much
customer value as that offered by first and second movers
Learning curve - Answer-depiction that shows that at the beginning the cost per unit is
more and goes down and flattens as time goes on and improvements are made
, Predictors of likelihood of attack - Answer-market commonality, resource similarity,
awareness, motivation, ability, first-mover benefits, organizational size, quality
Corporate strategy - Answer-specifies action a firm takes to gain a competitive
advantage by selecting and managing a group of different businesses competing in
different product markets
Questions that corporate strategies answer - Answer-What industries are we in?
Vertical integration? What should be our geographic scope?
Diversification - Answer-scope of the markets and industries in which the firm competes;
how managers buy, create, and sell different businesses to match skills and strengths
with opportunities presented to the firm; company growth through starting up or
acquiring businesses outside the company's current products and markets
Types of diversification - Answer-low level, moderate to high level, very high level
Mergers - Answer-voluntary combination
of two companies operations,
assets, and financial transactions; done on a basis of equality
Acquisitions - Answer-combination
of two companies operations,
assets, and financial transactions; not done on a basis of equality; mutual consent
Takeovers - Answer-special type of acquisition when the target firm did not solicit the
acquiring firm's bid for outright ownership; without mutual consent
Reasons for acquisitions - Answer-Increase Market Power, Overcome Entry Barriers,
Cost of New Development/Increased Speed to Market, Lower Risk Compared to
Developing New Products, Increased Diversification, Reshaping Competitive Scope,
Learning and Developing New Capabilities, Access to new products/technologies,
Adopting a disruptive technology
Why do acquisitions fail? - Answer-integration difficulties, bad target
evaluations/assessments, firm becomes unwieldy, managerial conflict, loss of key
employees in acquired firms, large debt (paying too much), inability to achieve synergy,
too much diversification, too large, managers overly-focused on acquisitons
Effective acquisitions - Answer-Complementary Assets, Friendly Acquisition, Careful
Selection, Financial Slack, Low Debt, Sustained R & D, Experienced with Change
Different forms of restructuring - Answer-downsizing (shedding personnel and/or
facilities); downscoping (eliminating businesses that are unrelated to its core business);
