WPC 480 Final Exam Questions with Verified Answers
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WPC 480
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WPC 480
Which of the following is the best definition of corporate strategy? - Answer-A firms attempt to gain a competitive advantage while operating in several different industries or markets simultaneously.
by definition, is a strategy for managing several businesses within the same firm. The hope is al...
WPC 480 Final Exam Questions with
Verified Answers
Which of the following is the best definition of corporate strategy? - Answer-A firms
attempt to gain a competitive advantage while operating in several different industries or
markets simultaneously.
by definition, is a strategy for managing several businesses within the same firm. The
hope is always that the combination of businesses will produce greater profits than
those businesses would do as multiple, separate, standalone firms.
What is most likely an explanation for why a firm that has no need for a corporate
strategy will have to engage in corporate strategy if the firm is successful? - Answer-The
firm will be motivated to grow beyond the size of a single industry or market.
SBU is an acronym. What does it stand for? - Answer-strategic business unit
What is an SBU? - Answer-A seperate line of business within a firm that has its own
competitive strategy
Backward integration - Answer-Buying suppliers along the value chain
Forward integration - Answer-Purchasing buyers along the value chain
Related diversification - Answer-creating SBU's that operate in different markets,
requiring similar capabilities
Unrelated diversification - Answer-Creating SBU's that operate in a different market that
is loosely interconnected within the firm
Diversification premium - Answer-stock markets value the firm at more than the sum of
values of separate SBUs
Diversification discount - Answer-stock markets value the firm at less than the sum of
values of separate SBUs
A conglomerate is a corporation with SBUs that are moderately related. - Answer-False,
firms with very little relatedness between each other are run by the same company.
Relatedness between SBUs in a corporation is generally associated with lower
performance and greater risk of failure of the corporate strategy. - Answer-False
Which of the following is the best indicator of the relatedness between SBU 1 and SBU
2? - Answer-Are SBU 1 and SBU 2 capable of swapping managers in a relatively short
time?
, Relatedness is a concept in strategic analysis that raises the issue of how costly it
would be for a single firm to manage and operate effectively two businesses
together.The more related, the less risk and difficulty for managers to be in charge of
both firms because the firms are very similar organizations facing similar issues
In corporate strategy, there is two separate types of integration: vertical integration and
corporate integration. What is the best definition of corporate integration? - Answer-The
degree to which SBUs are interdependent upon one another.
A corporate strategy to be successful must make much more profits and/or create more
value than which of the following baseline definitions of value? - Answer-The sum of the
value of the SBUs as independent firms.
With a well designed system of governance it is possible to essentially eliminate any
principal-agent problems of opportunism between shareholders and top managers of
the firm. - Answer-False
no incentive system is perfect and in business organizations, there are built-in conflicts
between motivation
Adverse selection - Answer-Choosing an action that is suboptimal for a firms overall
interest
Moral hazard - Answer-The incentive for taking on greater risk when investing other
peoples money
Opporotunism - Answer-Consciously pursuing one's own interests at the expense of a
principal or employer
Information Asymmetry - Answer-Specialization in the corporation leads to management
being unable to verify the advice and data given by a specialist
Externalities - Answer-a cost or damage done by the firm but someone else is harmed
or paying for it
One way to reduce the problem of opportunism by top managers of public corporations
is if top managers are compensated mostly on the long-term stock value of the firm. -
Answer-True, opportunism is stealing by an agent from their principal
Shareholders main way of protecting their interests in a public corporation is by voting to
approve the major activities of the firm's managers. - Answer-False
Firms that follow the shared value creation model have fewer problems of governance
than firms that follow the shareholder capitalism model. - Answer-False
Information asymmetry is a situation that makes it easier for subordinates to act
opportunistically toward their employer or managers. - Answer-True
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