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TESTBANK: CHAPTER 14
Implementing Corporate Strategy:
Managing the Multibusiness Firm
True/False Questions
1. According to Jack Welch, the advantages of focus that single business companies possess are
outweighed the advantage that multibusiness companies possess in terms of their ability to share the
ideas from many different sources.
[See p.361]
2. The key issues with regard to the implementation of corporate strategy concern the relationships
between the corporate headquarters and the individual businesses.
[See p.363]
3. Goold, Campbell, and Alexander’s concept of parenting advantage proposes that a key criterion for
whether a company should own a particular business corporation whether the value added from owning
that business exceeds the costs of administering that business.
[See p.363]
4. Within a multidivisional company, “portfolio management” refers to decisions over which business
the company should own, how resources should be allocated among these businesses, and how to
manage the linkages between the businesses in order to exploit the synergies among them.
[See pp.363-364]
5. For conglomerate companies (companies that comprise unrelated businesses) portfolio management
is likely to be more important source of value creation than in a diversified company that comprises
closely-related businesses.
[See pp.363-365]
6.. The GE/McKinsey portfolio planning matrix is less sophisticated than the BCG growth-share
matrix, but is easier to apply.
[See pp.364-365]
7. The axes of the BCG and GE/McKinsey business portfolio matrixes represent the two fundamental
sources of profitability for a business: the attractiveness of its industry and its competitive advantage.
[See pp.364-365]
8. The Ashridge portfolio display is distinguished by the fact that it takes account of fit between each
business and the corporate owner.
[See pp.365-366]
9. Increasingly, the corporate headquarters of multibusiness companies are being divided into two
parts: that which exerts financial and strategic control over the businesses and that which provided
common services to the businesses.
[See p.367]
10. In large multibusiness, multinational companies shared service organizations are almost always
located close to their corporate headquarters.
[See p. 367]
11. Typically, a common corporate identity and well-established corporate systems means that there are
few barriers to transferring best practices between business units within a company.
[See pp.368-369]
12. Sharing resources and activities between business units can often impose costs which exceed the
value of the synergies gained.
[See pp.368-369]
13. The closer the linkages between the business units of a multibusiness corporation, the more
involved corporate management must be in coordinating across the businesses.
[See pp.368-369]
14. Multibusiness corporations with close linkages between their businesses tend to have smaller
corporate headquarters than multibusiness corporations with more independent businesses.
[See p.369]
15. “Restructuring” is a corporate strategy that involves acquiring companies then intervening to cut
costs, divest assets, revise competitive strategies, and adjust financial structure.
[See pp.370-371]
16. The strategic planning systems of multibusiness corporations have been criticized for the fact that
they do not make strategy.
[See p.373]
17. Most multibusiness companies have a dual planning process: strategic planning focuses on the short
and medium term, financial planning on the medium to long term
[See p.374]
18. A key challenge for the strategic planning systems of large corporations is reconciling top-down
strategic leadership with bottom-up strategy initiatives.
[See pp.372-373]
19. The mechanisms through which the corporate headquarters exercises control over individual
businesses can be classified into “input control” and “output control.” Performance management
systems represent a form of “input control.”
[See p.374-375]
20. If corporate management focuses heavily upon enforcing financial performance targets on its
individual businesses, this increases the need for corporate management to guide the strategic plans of
the individual businesses.
[See pp.374-375]
21. Jack Welch’s approach to corporate management at General Electric incorporated the principle that
sustaining a high level of internal stress within the organization counteracted complacency and
increased responsiveness to external change.
[See p. 377]
22. A strategic inflection point is a point where major changes in a firm’s competitive environment
require a complete change of strategy
[See p.381]
23. Williamson believed that one of the key advantages of the M-form was that it centralized decision
making in corporate headquarters.
[See pp.383-384]
24. Oliver Williamson argument that the multidivisional corporation resolves the agency problem in
large public corporation has not been verified in practice.
[See p.384]
25. Mintzberg identified a key rigidity of the multidivisional firm its tendency to impose standardized
corporate management systems across all its divisions.
[See p.384]
Multiple Choice Questions
26. The fundamental issue that implementing corporate strategy addresses is:
[See pp.362-363]
27. The company which has done most to pioneer innovations in corporate management during the
second half of the 20th century is:
[See pp.363, 364, 377, 378].
28. Besides managing the overall corporate portfolio of businesses, corporate management can add
value to individual businesses by:
[See p.365]
29. The main purpose of a portfolio planning matrix is to:
[See p.363]
30. The development of portfolio planning techniques at the end of the 1960s was initiated by:
[See p.363]
31. The axes of the BCG and GE/McKinsey portfolio planning matrices act as proxies for two key
strategic variables:
[See pp.364-365]
32. Portfolio planning techniques, (also called portfolio matrixes), contribute to the following corporate
management function:
[See pp.363-365]
33. A major limitation of the BCG matrix in guiding corporate strategy is:
[See p.365]
34. The concept of “parenting advantage” is best summarized by the following statement:
[See p.365]
35. The primary purpose of the “Ashridge portfolio display” is to:
[See pp.365-366]
36. What are the two dimensions of the Ashridge portfolio display?
[See pp.365-366]
37. The principal merit of the BCG portfolio planning matrix is:
[See pp.364-365]
38. By separating their corporate headquarters into a corporate management unit and a shared services
organization, large corporations anticipate the following benefits:
[See p.367]
39. Michael Porter believes that managing linkages among businesses through transferring skills and
sharing resources offer greater potential for creating value than portfolio management because:
[See p.368]
40. Although sharing resources among the different businesses within the multibusiness corporation
can offer substantial cost economies, these savings are often offset by:
[See pp.368-369]
41. The corporate headquarters of companies comprising independent business such as Berkshire
Hathaway, Danaher, Jardine Matheson, and the Tata Group as compared to those of closely-linked
business such as Royal Dutch Shell, IBM, BASF, and Unilever tend to be:
[See p.369]
42. The type of corporate strategy through which most leading private equity groups such as Carlyle
Group, Kohlberg Kravis Roberts, and Blackstone create value for their investors is best described as:
[See p.371]
43. The principal mechanisms through which the corporate headquarters seeks to improve the strategic
and operational management of its businesses are:
[See pp.370-376]
44. Strategic Milestones, Balanced Scorecards, and Strategy Maps are all devices which aim to:
[See p.373]
45. The choice between strategic planning and financial control as a corporate management style for a
particular company depends upon:
[See pp.374-376]
46. IBM and Samsung Electronics are examples of large, mature corporations that have:
[See pp.379-380]
47. Corporate governance is:
[See p.381]
48. Oliver Williamson said two main corporate governance advantages of the multidivisional structure
(“M-form”) for large, diversified companies were:
[See pp.383-384]
49. A major disadvantage of legislation to improve corporate governance by imposing more stringent
reporting requirements on public companies and increasing the penalties that directors face for
negligence and misconduct is:
[See p.383]
50. Howard Hughes at Hughes Corporation, Ken Lay at Enron, Dennis Kozlowski at Tyco, Jean-Marie
Messier at Vivendi, and Fred Goodwin at Royal Bank of Scotland illustrate:
[See p.384]
51. Which of the following is not a key difference between a multidivisional company and a holding
company?
[See p.385]
