Chapter 11 Managing the Multibusiness Firm Answer Key
Multiple Choice Questions
1.
(p. 328–
330)
Which of the following is not a key task of the multibusiness firm to add value to its business
units?
2.
(p. 311)
Traditionally, firms that have grown through unrelated diversification have faced which of the
following problems?
3.
(p. 313)
Systematic undervaluation of diversified firms is called:
4.
(p. 315)
Which of the following dimensions are typically used in creating a corporate portfolio matrix?
5.
(p. 321)
A transfer using a mandated market price is less effective when the downstream unit:
6.
(p. 329)
A performance metric selected for division reporting should:
7.
(p. 323)
Vertical integration, as represented among profit centers in a multibusiness firm, is:
8.
(p. 324)
Which of the following is a reason for centralizing technology development in a multi-business
firm:
Difficulty: 3 Hard
9.
(p. 330)
The major problem with the ROI metric is:
10.
(p. 329)
The worldwide product structure emerged because of:
True / False Questions
11.
(p. 328–
Forming SBUs benefitted GE by sharpening management’s attention on investment decisions
that made the strongest contribution to a unit’s market position.
12.
(p. 332)
A multibusiness firm’s corporate infrastructure should be in strong alignment with the
strategies of the firm’s business units.
13.
(p. 313)
A diversification discount occurs because a business is willing to be acquired for a price that is
lower than its market value.
14.
(p. 317)
BCG’s low-cost market share model applies poorly to multibusiness firms whose business are
primarily value driven with strong sustainable market positions.
15.
Transfers based on exchange autonomy are typically used to handle ad hoc transactions.
16.
(p. 329)
Among metrics used for divisional reporting, the residual income metric developed by GE in
the 1960s is superior to an ROI metric.
17.
(p. 313–
A key condition for the BCG matrix to be effective is that the firm must be able to grow new
businesses to dominance in their markets.
18.
(p. 332)
When top management builds a corporate culture that promotes risk taking and double-loop
learning, the corporate infrastructure can contribute markedly to the firm’s performance.
19.
(p. 329)
A major objective in choosing a divisional reporting metric is that it should allow for effective
management appraisal.
20.
(p. 32)
The strategies of both the in-house buyer and supplier must be considered when a transfer
price is set.
Short Answer Questions
21.
(p. 312–
313)
Under what conditions might an internal capital market be superior to external sources of
capital?
22.
(p. 330–
331)
Suppose a manager was going to invest in the projects shown in the figure below and that the
manager can select more than one project. Which should he/she choose if:
a) ROI is the most important objective;
b) improved earnings are the important objective; or
c) improving shareholder returns is the most important objective?
23.
(p. 316–
317)
Explain why the assumptions behind the growth-share matrix make it inappropriate for most
multibusiness firms.