SEVI 3013H PRACTICE EXAM GUIDE
QUESTIONS WITH COMPLETE
SOLUTIONS
portfolio management - Answer-a method of (a) assessing the competitive position of a
portfolio of businesses within a corporation, (b) suggesting strategic alternatives for
each business, and (c) identifying priorities for the allocation of resources across the
businesses
acquisitions - Answer-the incorporation of one firm into another through purchase
mergers - Answer-the combining of two or more firms into one new legal entity
divestment - Answer-the exit of a business from a firm's portfolio
strategic alliance - Answer-a cooperative relationship between two or more firms
joint ventures - Answer-new entities formed within a strategic alliance in which two or
more firms, the parents, contribute equity to form the new legal entity
maturity stage - Answer-the third stage of the product life cycle, characterized by (1)
slowing demand growth, (2) saturated markets, (3) direct competition, (4) price
competition, and (5) strategic emphasis on efficient operations
decline stage - Answer-the fourth stage of the product life cycle, characterized by (1)
falling sales and profits, (2) increasing price competition, and (3) industry consolidation
reverse positioning - Answer-a break in industry tendency to continuously augment
products, characteristic of the product life cycle, by offering products with fewer product
attributes and lower prices
breakaway positioning - Answer-a break in industry tendency to incrementally improve
products along specific dimensions, characteristic of the product life cycle, by offering
products that are still in the industry but that are perceived by customers as being
different
harvesting strategy - Answer-a strategy of wringing as much profit as possible out of a
business in the short to medium term by reducing costs
consolidation strategy - Answer-a firm's acquiring or merging with other firms in an
industry in order to enhance market power and gain valuable assets
, turnaround strategy - Answer-a strategy that reverses a firm's decline in performance
and returns it to growth and profitability
1. asset cost surgery
2. selective product and market pruning
3. piecemeal productivity improvements - Answer-What are the three approaches to
executing a turnaround strategy?
diversification - Answer-the process of firms expanding their operations by entering new
businesses
1. paying an excessive premium for the target firm
2. failing to integrate the activities of the newly acquired businesses into the corporate
family
3. undertaking diversification initiatives that are too easily imitated by competition -
Answer-What are the three reasons for the failure of many diversification efforts?
related diversification - Answer-a firm entering a different business in which it can
benefit from leveraging core competencies, sharing activities, or building market power
1. economies of scope
2. market power - Answer-To create value with related diversification, managers can
pursue what two paths?
economies of scope - Answer-cost savings from leveraging core competencies or
sharing related activities among businesses in a corporation
core competencies - Answer-a firm's strategic resources that reflect the collective
learning in the organization
sharing activities - Answer-having activities of two or more businesses' value chains
done by one of the businesses
market power - Answer-firms' abilities to profit through restricting or controlling supply to
a market or coordinating with other firms to reduce investment
1. pooled negotiating power
2. vertical integration - Answer-What are the two primary means to achieve market
power?
pooled negotiating power - Answer-the improvement in bargaining position relative to
suppliers and customers
vertical integration - Answer-an expansion or extension of the firm by integrating
preceding or successive production processes
QUESTIONS WITH COMPLETE
SOLUTIONS
portfolio management - Answer-a method of (a) assessing the competitive position of a
portfolio of businesses within a corporation, (b) suggesting strategic alternatives for
each business, and (c) identifying priorities for the allocation of resources across the
businesses
acquisitions - Answer-the incorporation of one firm into another through purchase
mergers - Answer-the combining of two or more firms into one new legal entity
divestment - Answer-the exit of a business from a firm's portfolio
strategic alliance - Answer-a cooperative relationship between two or more firms
joint ventures - Answer-new entities formed within a strategic alliance in which two or
more firms, the parents, contribute equity to form the new legal entity
maturity stage - Answer-the third stage of the product life cycle, characterized by (1)
slowing demand growth, (2) saturated markets, (3) direct competition, (4) price
competition, and (5) strategic emphasis on efficient operations
decline stage - Answer-the fourth stage of the product life cycle, characterized by (1)
falling sales and profits, (2) increasing price competition, and (3) industry consolidation
reverse positioning - Answer-a break in industry tendency to continuously augment
products, characteristic of the product life cycle, by offering products with fewer product
attributes and lower prices
breakaway positioning - Answer-a break in industry tendency to incrementally improve
products along specific dimensions, characteristic of the product life cycle, by offering
products that are still in the industry but that are perceived by customers as being
different
harvesting strategy - Answer-a strategy of wringing as much profit as possible out of a
business in the short to medium term by reducing costs
consolidation strategy - Answer-a firm's acquiring or merging with other firms in an
industry in order to enhance market power and gain valuable assets
, turnaround strategy - Answer-a strategy that reverses a firm's decline in performance
and returns it to growth and profitability
1. asset cost surgery
2. selective product and market pruning
3. piecemeal productivity improvements - Answer-What are the three approaches to
executing a turnaround strategy?
diversification - Answer-the process of firms expanding their operations by entering new
businesses
1. paying an excessive premium for the target firm
2. failing to integrate the activities of the newly acquired businesses into the corporate
family
3. undertaking diversification initiatives that are too easily imitated by competition -
Answer-What are the three reasons for the failure of many diversification efforts?
related diversification - Answer-a firm entering a different business in which it can
benefit from leveraging core competencies, sharing activities, or building market power
1. economies of scope
2. market power - Answer-To create value with related diversification, managers can
pursue what two paths?
economies of scope - Answer-cost savings from leveraging core competencies or
sharing related activities among businesses in a corporation
core competencies - Answer-a firm's strategic resources that reflect the collective
learning in the organization
sharing activities - Answer-having activities of two or more businesses' value chains
done by one of the businesses
market power - Answer-firms' abilities to profit through restricting or controlling supply to
a market or coordinating with other firms to reduce investment
1. pooled negotiating power
2. vertical integration - Answer-What are the two primary means to achieve market
power?
pooled negotiating power - Answer-the improvement in bargaining position relative to
suppliers and customers
vertical integration - Answer-an expansion or extension of the firm by integrating
preceding or successive production processes
