ORGANIZATION Behaviour Chapter 10 Testbank

Chapter 09 - Multi-business Strategy
Chapter 09
Multi-business Strategy
Multiple Choice Questions
1. (p. 241) The _______ approach was one of the early approaches for charting strategy and
allocating resources in multi-business companies. It was particularly popular in the 1960s and
1970s.
A. Case
B. Matrix-management
C. Portfolio
D. Patching
Difficulty: Easy
Learning Objective: 1
2. (p. 243) In the past ________ years, we have seen a virtual explosion in the extent to which
single-business companies seek to acquire other businesses to grow and diversify.
A. 5
B. 50
C. 30
D. 100
Difficulty: Medium
3. (p. 243) Which of the following is NOT a reason for the emergence of multi-business
companies?
A. Companies can enter businesses with greater growth potential
B. Companies can enter businesses with different cyclical considerations
C. Companies can diversify inherent risks
D. Companies can slow their internal growth
Difficulty: Easy
9-1
4. (p. 243) Which of the following firms pioneered the portfolio approach to strategic analysis
and choice?
A. Bain Consulting
B. Boston Consulting Group
C. Booz Allen Hamilton
D. McKinsey & Company
Difficulty: Medium
5. (p. 243) ________ attempt to help managers "balance" the flow of cash resources among their
various businesses while also identifying the overall strategic purpose within the group of
businesses.
A. Growth techniques
B. Market share techniques
C. Portfolio techniques
D. Environment techniques
Difficulty: Easy
6. (p. 244) The ________ is the projected rate of sales growth for the market being served by a
particular business.
A. Market share
B. Market projection
C. Market growth rate
D. Relative competitive position
Difficulty: Medium
9-2
7. (p. 244) __________ usually is expressed as market share of a business divided by the market
share of its largest competitor.
A. Relative competitive position
B. Relative market share
C. Market growth rate
D. Growth-share rate
Difficulty: Easy
8. (p. 244) In the BCG growth-share matrix, the ________ are businesses in rapidly growing
markets with large market shares.
A. Cash cows
B. Question marks
C. Stars
D. Dogs
Difficulty: Medium
9. (p. 244) Businesses with high market share in low-growth industries are called:
A. Stars
B. Cash cows
C. Question marks
D. Dogs
Difficulty: Medium
9-3
10. (p. 244) Zeon Plus Company requires substantial investment to maintain and expand their
dominant position in the growing electronic zeonites market. In fact, this investment is often
in excess of the funds that the firm can generate internally. However, Zeon Plus does have a
very large market share. What type of company is this, according to the BCG growth-share
matrix?
A. Cash cow
B. Dog
C. Question mark
D. Star
Difficulty: Medium
11. (p. 244) When using the BCG growth-share matrix, the dividing point for the growth rate of
an industry in constant dollars is typically:
A. The market's growth rate
B. The consumer price index
C. The growth rate of the gross domestic product (GDP)
D. The growth rate of the gross national product (GNP)
Difficulty: Hard
12. (p. 244) ________ is the current foundation of corporate portfoliosthey sustain corporate
overhead, dividends and provide debt capacity.
A. Cash cows
B. Dogs
C. Stars
D. Question marks
Difficulty: Medium
9-4
13. (p. 244) Low market share businesses in low market growth industries are called:
A. Stars
B. Cash cows
C. Dogs
D. Question marks
Difficulty: Easy
14. (p. 244) Crabtree Soup has been facing intense competition and suffering low profit margins
for a year now. The market for their specialty soups has matured and the firm is being
managed for short-term cash flow to supplement SwissCo's corporate-level resource needs.
Which type of firm is Crabtree Soup?
A. Star
B. Dog
C. Cash cow
D. Question mark
Difficulty: Medium
15. (p. 244) _______ are businesses whose high growth rate gives them considerable appeal, but
whose low market share makes their profit potential uncertain.
A. Dogs
B. Stars
C. Question marks
D. Cash cows
Difficulty: Easy
9-5
16. (p. 245) The _________ matrix was developed by McKinsey & Company at General
Electric.
A. Industry awareness
B. Growth-share
C. Industry attractiveness-business strength
D. Strategic environments
Difficulty: Medium
17. (p. 245) Corporate strategists found the growth-share matrix's singular axes
A. Limiting in their ability to reflect the complexity of a business's situation
B. A good way to simplify the complexity of a business's situation
C. A good reflection of the simplistic nature of most corporate-level decisions
D. To difficult to manipulate
Difficulty: Medium
18. (p. 245) How many cells are in the industry attractiveness-business strength matrix?
A. 4
B. 9
C. 12
D. 16
Difficulty: Easy
19. (p. 245) Which matrix makes fine distinctions among business portfolio positions with the
inclusion of high/medium/low axes?
A. Industry strength matrix
B. Growth-share matrix
C. Strategic environments matrix
D. Industry attractiveness-business strength matrix
Difficulty: Medium
9-6
20. (p. 245) In the industry attractiveness-business strength matrix, the position of a business is
calculated by _______ its rating along the two dimensions of the matrix.
A. Subjectively qualifying
B. Objectively qualifying
C. Subjectively quantifying
D. Objectively quantifying
Difficulty: Medium
21. (p. 247) Which of the following is NOT a strategic approach suggested by the industry
attractiveness-business strength matrix?
A. Outsource management
B. Invest to grow
C. Invest selectively and manage for earnings
D. Harvest or divest for resources
Difficulty: Easy
22. (p. 245) The ______ decisions of the industry attractiveness-business strength matrix remain
quite similar to those of the BCG growth-share matrix.
A. Management approach
B. Resource allocation
C. Business strategy
D. Functional strategy
Difficulty: Medium
9-7
23. (p. 245) The industry attractiveness-business strength matrix improves on the BCG matrix in
some fundamental ways. Which of the following is NOT one of these?
A. The terminology associated with the industry attractiveness-business strength matrix is
preferable because it is less offensive
B. The terminology associated with the industry attractiveness-business strength matrix can
be much more complicated than the BCG matrix
C. The multiple measures associated with each division of the industry attractiveness-business
strength matrix tap many factors relevant to business strength and market attractiveness
besides market share and market growth
D. There is broader assessment during the planning process of the industry attractivenessbusiness strength matrix
Difficulty: Medium
24. (p. 246) Which of the following factors is NOT considered in determining industry
attractiveness?
A. Nature of competitive rivalry
B. Bargaining power of suppliers/customers
C. Firm's level of differentiation
D. Financial norms
Difficulty: Medium
25. (p. 246) Which of the following factors is considered in determining a business's strength for
the industry attractiveness-business strength matrix?
A. Threat of substitute products
B. Economic factors
C. Sociopolitical considerations
D. Response time
Difficulty: Medium
9-8
26. (p. 246) Which of the following is a factor in the cost position that helps determine business
strength?
A. Delivery times
B. Manufacturing flexibility
C. Brand awareness
D. Economies of scale
Difficulty: Medium
27. (p. 245) Which matrix involves a framework that can help ensure that businesses' strategies
are consistent with strategies appropriate to their strategic environment?
A. Strategic choice matrix
C. Industry attractiveness-business strength matrix
D. Strategic environments matrix
Difficulty: Medium
28. (p. 245) Which matrix allows one way for multi-business companies to rationalize what
businesses they are in--businesses that share core competencies and associated competitive
advantages.
A. Growth-share matrix
B. Portfolio attractiveness matrix
C. Strategic environments matrix
D. Business strength matrix
Difficulty: Medium
9-9
29. (p. 246) _________ are those that have few sources of advantage, but the size is large-typically the result of scale economies.
A. Volume businesses
B. Stalemate businesses
C. Specialization businesses
D. Fragmented businesses
Difficulty: Easy
30. (p. 248) _________ has few sources of advantage, with most of them small. This results in
very competitive situations.
A. Fragmented businesses
B. Volume businesses
C. Stalemate businesses
D. Specialization businesses
Difficulty: Medium
31. (p. 248) _________ has many sources of advantage. However, these are all small.
A. Stalemate businesses
B. Fragmented businesses
C. Specialization businesses
D. Volume businesses
Difficulty: Medium
9-10
32. (p. 248) Which type of business involves differentiated products with low brand loyalty,
easily replicated technology and minimal scale economies?
A. Fragmented businesses
B. Specialization businesses
C. Volume businesses
D. Stalemate businesses
Difficulty: Medium
33. (p. 248) Skills in achieving differentiation in product design, branding expertise, innovation,
first-mover and sometimes scale characterize winners in:
A. Stalemate businesses
B. Specialization businesses
C. Volume businesses
D. Fragmented businesses
Difficulty: Hard
34. (p. 248) _________ has many sources of advantage and fined those advantages potentially
sizable.
A. Specialization businesses
B. Stalemate businesses
C. Fragmented businesses
D. Volume businesses
Difficulty: Medium
9-11
35. (p. 248) The only relationship between business units with the portfolio matrix is:
A. Creation of competitive advantage
B. Internally synergies
C. Cash
D. Core competencies
Difficulty: Difficult
36. (p. 248) Which of the following is NOT a limitation of the portfolio approaches?
A. Identifying individual businesses or distinct markets was not often as precise as the
underlying assumptions required
B. The underlying assumption about the relationship between
C. The approach did not emphasize that market share and profitability are the same across
different industries and market segments
D. The portfolio approach limited strategic options, which were seen mostly as basic strategic
missions rather than descriptions of the flow of resources in a company
Difficulty: Hard
37. (p. 248) The ______ portrays the notion that firms need to be self-sufficient in capital.
A. Environmental approach
B. Parenting approach
C. Portfolio approach
D. Patching approach
Difficulty: Medium
9-12
38. (p. 249) Opportunities to build value via diversification, integration or joint venture strategies
are usually NOT found in which of the following?
A. Market-related activities
B. Operations-related activities
C. Management activities
D. Non-value chain activities
Difficulty: Easy
39. (p. 251) __________ is concerned with whether or not the potential competitive advantages
expected to arise from each value opportunity have materialized.
A. Strategic choice
B. Strategic analysis
C. Strategic evaluation
D. Strategic growth
Difficulty: Medium
40. (p. 250) Enhanced bargaining power with distributors and retailers to gain shelf space, shelf
positioning, stronger push, more dealer attention and better profit margins represents which of
the following sources of value building in multi-business companies?
A. Market-related opportunities
B. Functional-related opportunities
C. Potential competitive advantage
D. Operating opportunities
Difficulty: Hard
9-13
41. (p. 251) Which of the following represents an operating opportunity to build value or
sharing?
A. Shared inbound or outbound shipping and materials handling
B. Shared management know-how
C. Shared after-sales service
D. Shared brand name
Difficulty: Medium
42. (p. 252) The most compelling reason companies should diversify can be found in situations
when:
A. Core competencies are not similar
B. Core competencies can be leveraged with other products or into other markets
C. Management is similar in various businesses
D. Cash resources can be leveraged
Difficulty: Medium
43. (p. 253) The core competency must represent a major source of value to be a basis for
competitive advantage. Furthermore, the core competence:
A. Must be negotiable
B. Must be financial
C. Must be diversified
D. Must be transferable
Difficulty: Medium
9-14
44. (p. 254) _______ is those that rely on the same or similar capabilities to be successful and
attain competitive advantage in their respective product markets.
A. Leveraged businesses
B. Networked businesses
C. Related businesses
D. Unrelated businesses
Difficulty: Easy
45. (p. 254) Situations that involve _______ occur when no real overlapping capabilities or
products exist other than financial resources.
A. Financial diversification
B. Unrelated diversification
C. Related diversification
D. Leveraged businesses
Difficulty: Medium
46. (p. 254) The least profitable firms are:

A. Broadly diversified firms whose strategies are build around very general resources such as
money
B. Ones that involve combining resources into competitive advantage
C. Rigidly specialized in an attractive industry
D. Flexible
Difficulty: Medium
9-15
47. (p. 254) For competitive advantage to be sustainable, any combination of competencies must
be:
A. Expensive
B. Easily imitated
C. Unique
D. Sustainable themselves
Difficulty: Medium
48. (p. 255) The _________ perspective sees multi-business companies as creating value by
influencing the businesses they own.
A. Strategic environment
C. Patching
D. Parenting
Difficulty: Medium
49. (p. 255) Ensuring that certain issues are addressed, objectively assessed and assisting in any
resolution may be a parenting opportunity that could add value. These issues--like attracting
and keeping people with specialized skills--are:
A. Marketing-based
B. Management-based
C. Age-based
D. Part of the business definition
Difficulty: Medium
9-16
50. (p. 255) Consider Vepco, a company that began as a rocket propulsion development firm and
grew through vertical integration. The firm is trying to figure out how to keep pace with the
accelerated trends toward outsourcing that has developed in the last 10 years. Which type of
parenting opportunity does this represent?
A. Business definition/redefinition
B. Management
C. Specialized expertise
D. Predictable errors
Difficulty: Medium
51. (p. 256) Lengthy product life cycles can lead to over reliance on old products. This is an
example of:
A. External relations
B. Linkage
C. Predictable error
D. Specialized expertise
Difficulty: Medium
52. (p. 256) Whether apparent or not, _______ among business units within or outside the parent
company may be complex or difficult to establish without parent company help.
A. Capabilities
B. Expertise
C. Sales
D. Linkages
Difficulty: Medium
9-17
53. (p. 256) Governments, regulators, unions and suppliers represent ________ who potentially
could be managed more effectively by the parent, than by the individual business units.
A. Specialized expertise
B. Predictable errors
C. External stakeholders
D. Internal stakeholders
Difficulty: Easy
54. (p. 257) The fact that ______ may exist in classifying sources of parenting opportunity is a
minor consideration, relative to the value of the parenting framework for strategic analysis in
multi-business companies.
A. Overlap or redundancy
B. Turbulent markets
C. Major changes
D. Common capabilities
Difficulty: Medium
55. (p. 258) The duration of an advantage in patching is:

A. Unpredictable
B. Sustained
C. Short-term
D. Dependent on resources
Difficulty: Medium
9-18
56. (p. 258) _______ is the process by which corporate executives routinely remap businesses to
match rapidly changing market opportunities.
A. Parenting
B. Patching
C. Portfolio matching
D. Environmental strategy
Difficulty: Medium
57. (p. 258) When markets are turbulent and rapidly changing, _______ is seen as critical to the
creation of economic value in a multi-business company.
A. Positioning
B. Leveraging resources
C. Patching
D. Parenting
Difficulty: Medium
58. (p. 258) The strategic logic of patching is to:

A. Pursue more resources
B. Leverage resources
C. Establish a defensible position
D. Pursue opportunities
Difficulty: Medium
9-19
59. (p. 259) Under the ________ approach, establishing a vision, building resources and
leveraging across markets are all strategic steps to be taken by the firm.
A. Patching
B. Parenting
C. Resources
D. Position
Difficulty: Medium
60. (p. 258) According to the patching approach, strategic analysis should:
A. Focus on strategic processes alone
B. Focus on strategic processes more than strategic positioning
C. Focus on strategic positioning more than strategic planning
D. Focus on strategic positioning more than strategic processes
Difficulty: Medium
61. (p. 258) Eisenhardt and Sull suggest that managers should flexibly seize opportunities:
A. As long as that flexibility is disciplined
B. As long as the opportunities has positive net present value
C. As long as the capital raised in capital markets can finance the opportunities
D. As long as the managers keep a corporate strategic focus on profitability
Difficulty: Hard
62. (p. 259) The position-based approach to strategy works best in:
A. Moderately changing, well-structured markets
B. Rapidly changing, ambiguous markets
C. Turbulent markets
D. Slowly changing, well-structured markets
Difficulty: Medium
9-20
63. (p. 260) Which type of simple rules help managers rank the accepted opportunities?
A. How-to rules
B. Financial rules
C. Priority rules
D. Boundary rules
Difficulty: Easy
64. (p. 260) _________ focus on which opportunities can be pursued and which ones are beyond
pursuing.
A. Timing rules
B. Boundary rules
C. Financial rules
D. Project rules
Difficulty: Easy
65. (p. 260) Firms should use _______ to help managers decide when to pull out of old
opportunities that are no longer promising.
A. Exit rules
B. Boundary rules
C. Abandonment rules
D. Priority rules
Difficulty: Medium
9-21
66. (p. 260) Gizmo Co. has rules for product development. Its project teams must know when a
product has to be delivered to the customer and total product development time must be less
than 1 year. This represents an example of:
A. Exit rules
B. Timing rules
C. Boundary rules
D. Priority rules
Difficulty: Easy
67. (p. 260) Spelling out key features of how a process is executed is the purpose of which type
of simple rules?
A. Boundary rules
B. Priority rules
C. How-to Rules
D. Exit rules
Difficulty: Easy
68. (p. 259) Simple rules need to:

A. Provide just enough structure to limit managers' flexibility to a safe amount
B. Capture opportunities that may not always be consistent with corporate intent
C. Provide enough structure to allow managers to move quickly to capture opportunities that
are consistent with corporate intent
D. Define the sources of competitive advantage within a firm's industry
Difficulty: Medium
9-22
69. (p. 259) _______ need to be brief, be axiomatic and convey fundamental guidelines to
decisions or actions.
A. Key rules
B. Fundamental rules
C. Competitive advantages
D. Simple rules
Difficulty: Easy
70. (p. 259) The fundamental argument of the _______ approach is that no one can predict how
long a competitive advantage will last, particularly in turbulent markets.
A. Patching
B. Parenting
C. Portfolio
D. Strategic environment
Difficulty: Medium
Essay Questions
71. Describe the elements of the BCG growth-share matrix.

Please refer to the discussion titled "The BCG Growth-Share Matrix," on pages 244-245.
72. What is the industry attractiveness-business strength matrix? How does this improve upon
the BCG matrix?
Please refer to the discussion titled "The Industry Attractiveness-Business Strength Matrix" on
page 245.
9-23
73. Identify and describe the four industry environments defined by the two dimensions of
BCG's strategic environments matrix.
Please refer to the discussion titled "BCG's Strategic Environments Matrix," on pages 245248.
74. Identify some critical limitations and shortcomings of the portfolio approach to strategic
analysis.
Please refer to the discussion titled "Limitations of Portfolio Analysis," on pages 248-249.
75. What two elements are critical in meaningful shared opportunities? Identify each and give
an example.
Please refer to the discussion titled "The Synergy Approach: Leveraging Core Competencies,"
on pages 249-252.
76. Why must each core competency provide a relevant competitive advantage to the intended
businesses when pursuing a synergy approach?
Please refer to the discussion titled "Each Core Competency Should Provide a Relevant
Competitive Advantage to the Intended Businesses" on pages 252-253.
9-24
77. What does it mean to leverage core competencies?

Please refer to the discussion titled "Businesses in the Portfolio Should Be Related in Ways
That Make the Company's Core Competencies Beneficial," on page 254.
78. What is the parenting framework? Briefly describe this perspective.

Please refer to the discussion titled "The Parenting Framework," on pages 255-258.
79. Describe size, age, management, business definition, linkages and other factors as the
focus of strategic analysis and choice across multiple businesses and their interface with a
parent company.
Please refer to the discussion titled "The Parenting Framework," on pages 255-258.
80. What is patching? Describe patching and its corporate focus.

Please refer to the discussion titled "The Patching Approach," on pages 258-260.
9-25

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Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

46. (p. 254) The least profitable firms are:

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

55. (p. 258) The duration of an advantage in patching is:

Chapter 09 - Multi-business Strategy

58. (p. 258) The strategic logic of patching is to:

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

68. (p. 259) Simple rules need to:

Chapter 09 - Multi-business Strategy

71. Describe the elements of the BCG growth-share matrix.

Chapter 09 - Multi-business Strategy

Chapter 09 - Multi-business Strategy

77. What does it mean to leverage core competencies?

78. What is the parenting framework? Briefly describe this perspective.

80. What is patching? Describe patching and its corporate focus.

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