A leveraged buyout refers to
a. a firm restructuring itself by selling off unrelated units of the company’s portfolio.
b. a firm pursuing its core competencies by seeking to build a top management team
that comes from a similar background.
c. a restructuring action whereby a party buys all of the assets of a business, financed
largely with debt, and takes the firm private.
d. an action where the management of the firm and/or an external party buy all of the
assets of a business financed largely with equity.
In some industries, technology drives globalization because the economies of scale
necessary to reduce costs cannot be met by competing in domestic markets alone.
a. True
b. False
In general, strategic actions elicit fewer competitive responses than do tactical actions.
a. True
b. False
An analysis of income distribution would include all of the following EXCEPT
a. the purchasing power of various age groups.
b. the discretionary income of various ethnic groups.
c. wage differentials between male and female employees working for a large
manufacturer.
d. how income is distributed among regions of the United States.
Independent frames of reference and organizational politics are the two primary barriers
to cross-functional team integration. Two methods to facilitate cross-functional
integration are _________ and
a. autonomous strategic behavior; induced strategic behavior.
b. incremental innovations; radical innovations.
c. bottom-up integration; top-down integration.
d. shared values; effective leadership.
When a firm becomes highly diversified through acquisitions, managers often focus on
financial controls rather than strategic controls.
a. True
b. False
The strengths of the five competitive forces are similar across strategic groups within an
industry.
a. True
b. False
Effectively implementing the ______ international corporate-level strategy often
produces higher performance than does implementing either the _______ or
_______ strategies.
a. multidomestic; global; transnational
b. global; multidomestic; transnational
c. cost leadership; differentation; focus
d. transnational; multidomestic; global
Hyundai allows customers to return their cars if they lose their job within 12 months of
purchase. Which of the following aspects of managing customer relationships is
Hyundai engaged in?
a. Who: Determining the Customers to Serve
b. What: Determining Which Customer Needs to Satisfy
c. How: Determining Core Competencies Necessary to satisfy Customer Needs
d. When: Determining When to Satisfy Customer Needs
Entrepreneurial opportunities are conditions in which new goods or services can satisfy
a need in the market.
a. True
b. False
Synergy exists when
a. cost savings are realized through improved allocations of financial resources based
on investments inside or outside the firm.
b. two units create value by utilizing market power in their respective industries.
c. firms utilize constrained related diversification to build an attractive portfolio of
businesses.
d. the value created by business units working together exceeds the value the units
create when working independently.
CaseScenario2:YepseTimbeFarms,Inc.
Yepsen Timber Farms, Inc., (YTF) was started around 1933 by Danish immigrants. The
firm’s primary operations were timber harvesting on several thousand acres in Oregon
acquired in part under the Homestead Act, and in part through direct purchase. The firm
was founded, initially as a partnership, between brothers Mogens and John (Jack)
Yepsen. The Yepson brothers were among the first four graduates at Oregon
Agricultural College (now Oregon State University), worked for the forest service and
private industry in Oregon for a number of years, then quit their respective jobs to
manage the forest they had been developing for a number of years. While timber is
considered a low-tech type business, Mogens and Jack were very innovative from the
standpoint that they established “tree farms,” that is, harvesting then replanting acreage
so that it would yield timber on a sustainable basis. At the time, and in certain parts of
the world to this day, timber lands were typically “clear cut” where all the trees were
stripped from a property, then the timber harvester simply moved to another parcel.
This practice left thousands of acres barren, and often damaged valuable animal habitats
and watershed. The brothers also introduced hybrid Pine and Douglas Fir trees that
grew considerably faster than the native forest stock. These factors allowed them to
grow trees that would be ready for market in 25 years, about half the time of that
required to grow native trees. The brothers’ idea about regeneration, care for the
environment, and hybridization defined the YTF business. Never would land be
harvested faster than it could replenish itself, or in a manner that threatened habitats or
watersheds. Eventually, Mogens and Jack passed on and their only surviving children,
Marjorie, Mary Jane, Burton, and Betty inherited the property. Two of these heirs took a
strong interest in further building the portfolio of Oregon properties, and also converted
the holdings to an S-Corp. to allow for the distribution of ownership and earnings to
their own children. Under their guidance, YTF was tremendously successful and
garnered much community acclaim for its sustainable farming practices. Now, the four
siblings are in their 70s and few of their children have expressed much interest in
managing the extensive portfolio of timber holdings. Among those that have expressed
an interest, some are very knowledgeable about forestry, while others have a track
record of incompetence and self-promotion. At the same time, ownership is now spread
among some 40 children, nieces, nephews, and grandchildren of the four siblings. Many
of these individuals’ only interest in YTF is the annual dividend check they
receive.What culture did Mogens and Jack nurture in YTF?
CaseScenario2:JewellCompany.
Jewell Company (JC) is a $2 billion diversified manufacturer and marketer of simple
household items, cookware, and hardware. In the early 1950s, JC’s business consisted
solely of manufactured curtain rods that were sold through hardware stores and retailers
like Sears. Since the 1960s however, the company has diversified extensively through
acquisition into such businesses as paintbrushes, writing pens, pots and pans, and
hairbrushes. Over 90 percent of its growth can be attributed to these many small
acquisitions, whose performance it improved tremendously through aggressive
restructuring and its corporate emphasis on cost-cutting and cost controls. While JC’s
sixteen different lines of business may appear quite different, they all share the common
characteristics of being staple manufactured items and sold primarily through volume
retail channels like Walmart, Target, and Kmart. Because JC operates each line of
business autonomously (separate manufacturing, R&D, and selling responsibilities for
each line), it is perhaps best described as pursuing a related linked diversification
strategy. The common linkages are both internal (accounting systems, product
merchandising skills, and acquisition competency) and external (distribution channel of
volume retailers). JC is presently contemplating the acquisition of Plastico, a $3 billion
U.S.-based manufacturer of flexible plastic products like trash cans, reheatable and
freezable food containers, and a broad range of other plastic storage containers designed
for home and office use. While Plastico has been highly innovative (over 80 percent of
its growth has come from internal new product development), it has had difficulty
controlling costs and is losing ground against powerful customers like Walmart. JC
believes that the market power it wields with retailers like Walmart will help it turn
Plastico’s prospects around.
If Jewell Company is able to transfer its competence in cost-cutting and cost controls to
Plastico (which has had difficulty controlling costs), it will have achieved the primary
means whereby a related linked diversification strategy creates value.
Discuss the organizational structures used to implement corporate-level strategies.
CaseScenario1:TheWaltDisneyCompany
The Walt Disney Company was founded as a cartoon studio in 1923 by Walt Disney
and his brother Roy with a
$500 loan from an uncle. In the early 1920s, cartoonist Walt Disney visited New York
to pitch his idea for a cartoon rabbit called Waldo. During that trip, through a
complicated series of events, Disney lost the rights to develop Waldo. On the train-ride
back to California he spoke with his wife about the importance of coming home with
some alternative character. “I can’t come back to our office and tell them I’ve lost
Waldo,” he bemoaned. This hardship inspired Disney to develop a new character,
Mickey Mouse, and release the world’s first fully- synchronized sound cartoon,
“Steamboat Willie” (starring, of course, Mickey Mouse). Disney’s creative genius was
now coupled with a fierce instinct to protect and control his creative output. Never
again would he lose “Waldo.” Consequently, the Walt Disney Company was pushed by
Walt to tirelessly create timeless and universal entertainment, consistently innovate and
take risks to deliver that entertainment, stress a vision of being the provider of choice of
quality family entertainment, and maintain rigorous control over the quality of
customers’ experiences with Disney products and its image. Such a personal passion for
control led the Walt Disney Company into theme parks because Disney did not want
Mickey’s reputation sullied by the dirty, cheap theme parks that littered the land during
those days. All films had to be new and of the highest quality animation (taking a
minimum of five years to create, including hand-painted backgrounds); sequel films
were not tolerated. Walt’s vision and risk taking propensity led him in the early 1960s to
buy 43,000 acres in Florida (now Walt Disney World), betting the company’s future on a
high-risk, uncertain venture. Amidst such a flurry of activity, Walt Disney died just
before Christmas 1966, and the company was literally stopped dead in its tracks. Walt
Disney’s blueprint was being followed to the letter, but no further (Walt Disney World
opened in 1971). No “new” creations were undertaken until 1982, when the company
finally launched such businesses as the Disney Channel, Touchstone, and their home
video business. Had it not been for the appointment of Michael Eisner as Disney’s new
CEO in 1984, the company would likely not have survived its perilous financial
situation and stifled creativity. Eisner returned the company to its roots of family
entertainment and values of quality, fairness, creativity, entrepreneurialism, and
teamwork.To what extent had the Walt Disney Company become a reflection of Walt up
to the time that he died in 1966?
CaseScenario3:Zachary,Wesley&Partners.
Zachary, Wesley & Partners (ZW&P) is a leveraged buyout (LBO) firm that specializes
in friendly buyouts of mid- sized U.S. retailing and manufacturing firms. ZW&P shuns
turnarounds and hostile takeovers; its typical deals
retain the existing management team and provide extensive funding for what is
perceived to be an already sound strategy. It focuses on this type of firm because the
partners have good contacts in retailing and manufacturing and they are typically able
to avoid bidding wars when the LBO is negotiated. The firm has been immensely
profitable over the years, in part due to the very extensive and selective due diligence
process used to winnow down the list of prospective targets. Fewer than one out of one
hundred candidates are even approached, and only a fraction of these passes further
screens in the LBO negotiations. The resulting profitability has, in turn, given ZW&P a
strong reputation in the financial community for successful deals, and among managers
for being able to put together needed financing with good business plans.What are this
firm’s core resources and capabilities?
CaseScenario2:YepseTimbeFarms,Inc.
Yepsen Timber Farms, Inc., (YTF) was started around 1933 by Danish immigrants. The
firm’s primary operations were timber harvesting on several thousand acres in Oregon
acquired in part under the Homestead Act, and in part through direct purchase. The firm
was founded, initially as a partnership, between brothers Mogens and John (Jack)
Yepsen. The Yepson brothers were among the first four graduates at Oregon
Agricultural College (now Oregon State University), worked for the forest service and
private industry in Oregon for a number of years, then quit their respective jobs to
manage the forest they had been developing for a number of years. While timber is
considered a low-tech type business, Mogens and Jack were very innovative from the
standpoint that they established “tree farms,” that is, harvesting then replanting acreage
so that it would yield timber on a sustainable basis. At the time, and in certain parts of
the world to this day, timber lands were typically “clear cut” where all the trees were
stripped from a property, then the timber harvester simply moved to another parcel.
This practice left thousands of acres barren, and often damaged valuable animal habitats
and watershed. The brothers also introduced hybrid Pine and Douglas Fir trees that
grew considerably faster than the native forest stock. These factors allowed them to
grow trees that would be ready for market in 25 years, about half the time of that
required to grow native trees. The brothers’ idea about regeneration, care for the
environment, and hybridization defined the YTF business. Never would land be
harvested faster than it could replenish itself, or in a manner that threatened habitats or
watersheds. Eventually, Mogens and Jack passed on and their only surviving children,
Marjorie, Mary Jane, Burton, and Betty inherited the property. Two of these heirs took a
strong interest in further building the portfolio of Oregon properties, and also converted
the holdings to an S-Corp. to allow for the distribution of ownership and earnings to
their own children. Under their guidance, YTF was tremendously successful and
garnered much community acclaim for its sustainable farming practices. Now, the four
siblings are in their 70s and few of their children have expressed much interest in
managing the extensive portfolio of timber holdings. Among those that have expressed
an interest, some are very knowledgeable about forestry, while others have a track
record of incompetence and self-promotion. At the same time, ownership is now spread
among some 40 children, nieces, nephews, and grandchildren of the four siblings. Many
of these individuals’ only interest in YTF is the annual dividend check they
receive.What must be done to continue the viability of YTF as a sustainable timber
farm?