MGT 406 VERSION B
Instructions:
Fall 2022
MGT 406 VERSION B
● This exam is worth 95 points and is comprised of 5 questions (3 short answer, and 2 essay).
● This is an individual assessment that must be completed through your own effort.
● This is an open-resources assessment. You are allowed to use your course textbook, lecture
notes, and lecture slides.
● You are not allowed to leave the class before the completion of your exam.
● The assessment carries a weight of 20% towards your final course grade.
● Please write in a coherent and concise manner. Demonstrate to me that you thoroughly
understand the concept in question.
● Remember: illustrations/pictures help me to understand your thinking!
3 Short Answer Questions (@ 15 pts. each). Please answer the following questions as fully as possible in the space provided. Your response will be graded for thoroughness. If you need additional space, please use the space provided at the end of the exam.
- (15 pts.) Why might a first mover fail to develop/maintain a competitive advantage in a rapidly changing industry?
- (15 pts.) Characterize the difference between an overcapacity acquisition and a product/market extension (acquisition).
- Under what condition might a company choose a focus differentiation strategy? What are the strategies advantages and disadvantages.
4 Essay Questions (@ 25 pts. each). Please answer the following questions as fully as possible in the space provided. Your response will be graded for thoroughness. If you need additional space, please use the space provided at the end of the exam.
1. (20 pts.) As of the close of the last fiscal year, Richemont earned roughly 13,000,000,000 Euros (in revenues) from all businesses in its corporate portfolio, which is depicted below. Please note that the revenue amount that was earned by a particular business is indicated in parentheses along with the corresponding contribution to the overall corporate portfolio.
Given the corporate portfolio depicted on the subsequent page, please:
(1) Determine the level of diversification that is evident in Richemont’s corporate portfolio;
(2) Determine whether Richemont appears to use operational or corporate relatedness.
(3) If any, what is the primary source of synergy in the Richemont portfolio?
(4) Has Richemont achieved an optimal level of corporate diversification? Why? Why not?
2. As of 1996, Dell was able to manufacture PCs primarily for corporate customers (which constituted 87% of its customer base) at a cost advantage of $415 per unit when compared to its nearest competitor, Compaq. Dell charged its customers an average selling price (ASP) of $2,316 per PC while Compaq charged its customers an average selling price (ASP) of $2,800. It did so despite the fact that its industry-leading (in terms of performance) post-sales technology support and defect-free mass customization manufacturing model would have allowed it to charge prices similar to Compaq’s (note: consumers would have been willing to pay (WTP) higher prices for Dell computers). Doing so left Dell with a per unit profit of $500 which was $79 less than the per unit profit earned by Compaq. Assume that if Dell had increased its selling price to $2,775 per unit (buyers would have been willing to pay this amount), profit would have increased 91% to $959.
Given the information provided: (1) describe (in detail) Dell’s business-level (competitive) strategy in terms of its sources of advantage and its competitive scope and (2) discuss why Dell might have chosen to compete in the manner that it did, and (3) characterize the advantages that Dell’s choice of competitive strategy would have been expected to attain.
Answer
3. Please answer the following questions in accordance with the corporate portfolio depicted below:
Yalla Corporation’s corporate scope uses diversification.
- (2 pts.) How would you characterize the distribution of the Yalla Corporation’s corporate portfolio?
Mostly balanced corporate distribution, most of the businesses are of equal size more or less.
- (2 pts.) How many Stars does the Yalla Corporation have in its portfolio?
1, business G
- (2 pts.) How many Question Marks does the Yalla Corporation have in its portfolio?
3 (F,E,D)
- (3 pts.) In terms of the revenue contributed by a single business which of the following is true?
- The Yalla Corporation is most dependent on a business that can be characterized as a Cash Cow.
- The Yalla Corporation is most dependent on a business that can be characterized as a Question Mark.
- The Yalla Corporation is most dependent on a business that can be characterized as a Dog.
- The Yalla Corporation is most dependent on a business that can be characterized as a Star.
- (7 pts.) Assume the arrows represent the movement that is expected to occur for any given business over the course of a 5-year period if no strategic changes are to be implemented. How would you characterize the long-term strategic health of the portfolio? Please justify your explanation.
- (7 pts.) What changes, if any, would you make to the Yalla Corporation’s portfolio of businesses?
4. In 2009 Disney paid $4,000,000,000 US for the right to acquire Marvel Comics. The deal was valued at $50 USD per share, which included a (per share) premium of $11 USD. The primary drivers of the acquisition were that Disney had been unable to develop a robust pipeline of valuable characters upon which to develop blockbuster movies. As a result, Disney Studios had fallen behind its rivals. However, with its vast international distribution network and its marketing skill this lack of content appeared to have been remedied by the recent acquisition of Pixar and Lucas Films along with the planned acquisition of Marvel Comics. Specifically, the Marvel deal meant that Disney would gain control over the production of movies involving 5,000 Marvel characters ranging from Spider Man to Iron Man and The Avengers as well other well-known (and, not so well-known) superheroes. The deal was not without its challenges. Among them was that Disney had not led the industry in targeting teenage boys – an increasingly relevant demographic.
Based on the information provided in the scenario determine the following: market value (per share); takeout price (per share); and the synergy value (per share) required to make this a strategically rational decision. Note that with respect to synergy value you may assume that your only focus should be on what Disney would have gained in the acquisition of Marvel Comics and not the value of the combined corporation as the scenario lacks information regarding Disney’s value. Further, you are to identify the strategic rationale(s) behind the acquisition and how it appeared that Disney planned to achieve synergy. In your response, be sure to explain any highlighted (italicized) concepts.
Answer
