MGT 8803 EXAM 3 BUSINESS STRATEGY
STUDY GUIDE
Related Diversification - ANS When a firm expands its activities into product or service lines
that are similar or complementary to those it currently offers. Vertical integration is a form of
related diversification
Business Level Strategy - ANS Single product market with a focus on competitive advantage
Corporate Level Strategy - ANS multiple industries and markets simultaneously with a focus
on firm scope and resource allocation
Stability Strategy - ANS a strategy that is characterized by an absence of significant change.
Maintain the firm's competitive advantage or remain in competitive parity
Justifications for Maintaining Status Quo - ANS -No expected significant changes in the
external environment or the environment is so uncertain management adopts a wait and see
attitude
-Firm needs to pause to consolidate recent growth or to devote its efforts on improving
efficiency
-Expected future economic conditions calls for a period of conserving cash flow
-Industry is mature with few or no growth prospects
Renewal Strategy - ANS A strategy that is characterized by an absence of significant change
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Justifications for Renewal Strategies - ANS -strategy characteristic of a company that is
reducing its size usually in an environment of decline
-Sub-Strategies: retrenchment, turnaround, divestiture, liquidation
Types of Bankruptcy (US Law) - ANS Chapter 7: Liquidation
Chapter 11: Reorganization
Growth Strategy - ANS A strategy in which the business expands the number of industries or
market or geographies served or expands the number of products or product lines offered in
either its current market or new markets
Why Growth is Important - ANS -higher firm profits and greater returns for investors
-drives more economies of scale and lower operatings costs (per transaction)
-signals firm as an industry leader
-can mask weaknesses in other parts of the business that are not growing
-Attracts better management and employee talent
-can be a significant motivator
Concentration - ANS the firm focuses on a single market or product. This allows the company
to invest more resources in production and marketing in that one area, but carries the risk of
significant losses in the event of a drop in demand or increases in the level of competition.
Vertical Integration - ANS A firm acquires business operations within the same production
vertical. It can be forward or backward in nature. The firm owns multiple stages in industry
value chain: supply chain, manufacturing, distribution, retail.
Horizontal Integration - ANS the merger or acquisition of copmanies at the same stage of
production in the same industry. When all producers of a good or service in a market merge, it
is the creation of a monopoly. If only a few competitors remain, it is termed an oligopoly
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Diversification - ANS Practice under which a firm enters an industry or market different from
its cire businesses. An increase in the variety of a firm's products, markets, and geographic
regions in which it competes.
Unrelated Diversification - ANS When a firm adds a new or unrelated product or service lines
and penetrates new markets
Market Attractiveness - ANS A way to measure the position of the business unit which
includes market share, market knowledge, cost efficiency, technology, and relative quality. It
uses results of external analysis: PESTEL, Porter Five Forces, Competitor Analysis, Market
Growth Rates, and Market Size
Comparative Business Strength - ANS use results of internal analysis plus relative market
share, product benchmarks, & strength of the brand
Reasons to backward integrate - ANS -supplier prices are not stable
-suppliers have attractive profit margins
-current suppliers are not reliable or cannot supply the required inputs important to the firm
-There are few suppliers and supplier bargaining power is high
-supplier product quality is not reliable
Benefits of Vertical Integration - ANS -Facilitates management control over more of the
industry value chain
-Supports a differentiation strategy by providing management additional opportunities to create
value
-May result in lower costs as inter-company pricing and profit talking is consolidated into one
organization
-Facilitates additional cost controls by coordinating planning across more of the value chain
Costs of Vertical Integration - ANS -May increase costs rather than reduce due to upstream
capacity issues, reduced upstream economies of scale, and managerial inefficiencies
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
STUDY GUIDE
Related Diversification - ANS When a firm expands its activities into product or service lines
that are similar or complementary to those it currently offers. Vertical integration is a form of
related diversification
Business Level Strategy - ANS Single product market with a focus on competitive advantage
Corporate Level Strategy - ANS multiple industries and markets simultaneously with a focus
on firm scope and resource allocation
Stability Strategy - ANS a strategy that is characterized by an absence of significant change.
Maintain the firm's competitive advantage or remain in competitive parity
Justifications for Maintaining Status Quo - ANS -No expected significant changes in the
external environment or the environment is so uncertain management adopts a wait and see
attitude
-Firm needs to pause to consolidate recent growth or to devote its efforts on improving
efficiency
-Expected future economic conditions calls for a period of conserving cash flow
-Industry is mature with few or no growth prospects
Renewal Strategy - ANS A strategy that is characterized by an absence of significant change
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Justifications for Renewal Strategies - ANS -strategy characteristic of a company that is
reducing its size usually in an environment of decline
-Sub-Strategies: retrenchment, turnaround, divestiture, liquidation
Types of Bankruptcy (US Law) - ANS Chapter 7: Liquidation
Chapter 11: Reorganization
Growth Strategy - ANS A strategy in which the business expands the number of industries or
market or geographies served or expands the number of products or product lines offered in
either its current market or new markets
Why Growth is Important - ANS -higher firm profits and greater returns for investors
-drives more economies of scale and lower operatings costs (per transaction)
-signals firm as an industry leader
-can mask weaknesses in other parts of the business that are not growing
-Attracts better management and employee talent
-can be a significant motivator
Concentration - ANS the firm focuses on a single market or product. This allows the company
to invest more resources in production and marketing in that one area, but carries the risk of
significant losses in the event of a drop in demand or increases in the level of competition.
Vertical Integration - ANS A firm acquires business operations within the same production
vertical. It can be forward or backward in nature. The firm owns multiple stages in industry
value chain: supply chain, manufacturing, distribution, retail.
Horizontal Integration - ANS the merger or acquisition of copmanies at the same stage of
production in the same industry. When all producers of a good or service in a market merge, it
is the creation of a monopoly. If only a few competitors remain, it is termed an oligopoly
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Diversification - ANS Practice under which a firm enters an industry or market different from
its cire businesses. An increase in the variety of a firm's products, markets, and geographic
regions in which it competes.
Unrelated Diversification - ANS When a firm adds a new or unrelated product or service lines
and penetrates new markets
Market Attractiveness - ANS A way to measure the position of the business unit which
includes market share, market knowledge, cost efficiency, technology, and relative quality. It
uses results of external analysis: PESTEL, Porter Five Forces, Competitor Analysis, Market
Growth Rates, and Market Size
Comparative Business Strength - ANS use results of internal analysis plus relative market
share, product benchmarks, & strength of the brand
Reasons to backward integrate - ANS -supplier prices are not stable
-suppliers have attractive profit margins
-current suppliers are not reliable or cannot supply the required inputs important to the firm
-There are few suppliers and supplier bargaining power is high
-supplier product quality is not reliable
Benefits of Vertical Integration - ANS -Facilitates management control over more of the
industry value chain
-Supports a differentiation strategy by providing management additional opportunities to create
value
-May result in lower costs as inter-company pricing and profit talking is consolidated into one
organization
-Facilitates additional cost controls by coordinating planning across more of the value chain
Costs of Vertical Integration - ANS -May increase costs rather than reduce due to upstream
capacity issues, reduced upstream economies of scale, and managerial inefficiencies
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
