Chapter 10 New Business Development Answer Key
Multiple Choice Questions
1.
(p. 289–
290)
Which of the following is a valid type of contribution a new venture may make to the parent
corporation?
2.
(p. 290–
291)
Which of the following types of contribution of the parent to the new venture is generally
questionable?
3.
(p. 291)
Which types of new business will a corporation’s financial capital contribute the most to?
4.
(p. 293)
Codifiable capabilities may add less value to a new venture because:
5.
(p. 294)
A core competence combines which of the following two types of corporate contributions to a
business:
6.
(p. 294)
When the growth demands of a new venture differ from those of the parent’s existing
businesses:
7.
(p. 293)
Which of the following is a determinant of an attractive market for diversification?
8.
(p. 296)
Which of the following is not a key task in new venture governance within a corporation?
9.
(p. 301)
Carve-outs provide a means to accomplish which of the following?
10.
(p. 297)
Which of the following factors or activities are critical determinants of cash flows in the
Ongoing Operations stage of an acquisition?
True / False Questions
11.
(p. 302)
The diversification paths of firms in the same industry vary across countries because countries
differ in the institutions that present diversification opportunities.
12.
(p. 290)
A major risk in using a new venture to reposition existing businesses is that the diversifying
firm may not be able to sustain the new venture’s market position.
13.
(p. 286)
Business diversification occurs when a product line is broadened or redesigned.
14.
(p. 291)
It is generally accepted that, on average, firms can be more efficient as a source of funds for a
new business than the external capital markets they replace.
15.
(p. 289)
As a motivation for diversification, risk reduction should not be subordinated to improving
returns in each business unit.
16.
(p. 293)
The problem of transferring capabilities is more acute for firms diversifying for the first time.
(p. 296)
17.
Valuation methods for new business units need not be tailored to their markets.
18.
(p. 295)
Management expertise in designing and implementing a particular strategy within the parent
company is potentially valuable for new ventures.
19.
(p. 298)
In both the turnaround and integration stages of an acquisition, a firm must make a significant
contribution to the new unit to justify the diversification move to investors.
20.
(p. 298)
One explanation for merger waves is shifts in the rules of competition in specific industries.
Short Answer Questions
21.
(p. 291–
292;
also,
glossary
What is the difference between economies of scope and economies of scale? Give one
example to support your answer.
22.
(p. 287–
288)
How is the concept of open innovation related to diversification?
23.
(p. 290)
One motivation for diversification is favorable repositioning of the firm’s current businesses.
What are the potential benefits and risks associated with this motivation?