GE (Chapter 6 Opening Case) is unusual in that it
a. is widely diversified but competes only in manufacturing industries.
b. has had an unblemished environmental record.
c. is one of the few large diversified large firms that have been successful over time.
d. restricted its investments to only developed economies.
A major incentive for the use of international strategy by French-based Carrefour Group
is the potential for large demand for goods and services from emerging markets such as
China and India.
a. True
b. False
Walt Disney Company has successfully used related diversification to create value by
a. sharing activities.
b. sharing activities and transferring core competencies.
c. transferring core competencies.
d. efficient internal capital allocation and restructuring.
Transaction costs include all of the following EXCEPT
a. charges from investment bankers who complete due diligence for the acquiring firm.
b. the loss of key employees following the acquisition.
c. managers’ time spent evaluating target firms.
d. managers’ time spent planning the diversification strategy of the firm.
A food bank in Florida was struggling to serve its customers. It asked Walmart for help.
Walmart sent a team of managers who reorganized storage and transportation. The food
bank was able to increase the number of clients served by tenfold. Walmart shared its
expertise in
a. distribution.
b. human resources.
c. marketing.
d. manufacturing.
Which of the following is NOT a value-creating activity associated with the
differentiation strategy?
a. Developing policies to ensure efficient hiring and retention to keep costs low and
implement training to ensure high employee efficiency.
b. Providing accurate and timely delivery of goods to customers.
c. Ensuring receipt of high quality supplies (raw materials and other goods).
d. Developing flexible systems that allow rapid response to customers’ changing needs.
The matrix organization has a dual structure combining functional specialization and
business product or project specialization.
a. True
b. False
Which of the following is TRUE?
a. Conglomerates no longer exist in the U.S. business scene, but are common in
emerging markets.
b. Unrelated diversified firms seek to create value through economies of scope.
c. The sharing of intangible resources, such as know-how, between firms is a type of
operational sharing in related diversifications.
d. Related constrained firms share more tangible resources and activities between
businesses than do related linked firms.
Omicron Artificial Intelligence is able to respond quickly to competitors’ actions and to
opportunities in the marketplace. This is an example of
a. agility.
b. a core competency.
c. flexibility.
d. responsiveness.
The reasons why a firm would overpay for a company that it acquires include
inadequate due diligence.
a. True
b. False
What are the two ways that an unrelated diversification strategy can create value?
Part 1: CaseScenario1:SycoInc.(SI).
Syco, Inc. (SI) was founded the late 1800s and grew through acquisition from being
primarily a large discount retailer into a highly diversified firm. Beyond retailing (still
SI’s dominant business), by the middle of the 1990s its lines of business included
significant market positions in insurance, consumer credit cards, stock brokerage,
commercial and residential real estate brokerage, and an online Internet portal. Each of
the non-retail businesses was average in its relative industry performance. Consistent
with the decentralized structure at SI and arms-length corporate oversight, each of these
businesses was also rapidly developing their own unique brands and customer
following. However, within a short period of time it became apparent that the retail
business was failing. SI’s vast mall-based department store holdings were suffering
from deferred maintenance and merchandising that did not appear to be popular with its
once large consumer base. At the same time, highly efficient and focused low-cost
competitors like Walmart were beginning to take significant market share from SI. On
the verge of bankruptcy by early 2000, SI’s management chose to sell off its insurance,
real estate, and stock brokerage units; it also spun off its credit card and portal
businesses in separate public offerings.
Why do you suppose that SI sold off or spun-off its non-retail businesses? Part 2: What
should SI do after selling off the non-retail businesses?
What are the results of the three forms of restructuring?
Identify and describe the major risks of international diversification.
CaseScenario2:ERPInc
ERP, Inc., (ERPI) is a leading provider of enterprise integration software (EIS). EIS
essentially allows a firm to connect and integrate processes across all aspects of its
business. To fuel its dramatic growth, ERPI has focused its organization entirely on
product development (software programming for a suite of EIS products) and selling
(making the sale and then moving onto a new target) while outsourcing the installation
and consulting aspects to the world’s largest accounting firms. This also makes ERPI
basically a “product company,” whereas most competitors like Oracle and PeopleSoft in
its market space operate as ‘solutions companies.” One benefit of this focused strategy
is that ERPI’s product is generally recognized as being 200 percent to 300 percent better
than competitors’ software, and thus adopters are thus likely to have a 1- to 2-year
advantage. In further contrast to the competition, ERPI has used its partnerships with
the accounting firms to deliver a turn-key solution, and has focused this solution on a
market comprised of the world’s largest, global manufacturers and consumer product
companies. The accounting firms, in turn, coordinate a comprehensive collection of
hardware, operating systems, and complementary software firms. Installation and
related consulting for EIS typically cost between $100 and $200 million, with the ERPI
software component accounting for only about 20 percent of the installed cost (the
remaining 80 percent is spent on the actual installation, not counting the value of the
customer’s time). To incentivize the accounting firms to help sell its product (since, at
least initially, the accounting firms had better reputations and controlled access to the
target customers), ERPI told its partners that it will never enter the installations and
consulting side of the business (aside from installation and consulting that ERPI does as
part of its software support). Dangling such a large carrot in front of the accounting
firms provided the continuing benefit of encouraging their continued support of ERPI
with their customers.
Imagine that ERPI has saturated the large-firm market for its products, competitors are
undermining its technological advantage, and ERPI needs to look to new markets for
revenue. Its CEO has suggested that it start selling its software down-market to
middle-market companies, and at the same time enter the consulting and installation
side of the business for this target market. What are the risks and opportunities of such a
strategy?
Describe the two strategic management approaches to managing alliances.
Discuss the three international corporate-level strategies. On what factors are these
strategies based?