CCM Portfolio Management & Strategy 3 — Questions and Answers
Question 1: In the GE-McKinsey Nine-Box Matrix, a business unit rated 'high' on industry attractiveness and 'medium' on competitive strength should be:
- Divested immediately
- Selectively invested in to build strength (Correct answer)
- Managed purely for cash extraction
- Harvested with no new capital
Correct answer: Selectively invested in to build strength
A high-attractiveness, medium-strength unit warrants selective investment to move it toward the top-right (invest/grow) zone.
Question 2: Corporate-level strategy differs from business-level strategy primarily in that it focuses on:
- How to compete within a single market
- Which markets and businesses the firm should participate in (Correct answer)
- Pricing tactics for individual product lines
- Operational efficiency improvements
Correct answer: Which markets and businesses the firm should participate in
Corporate-level strategy determines the scope of the firm—which industries, markets, and business units to include in the portfolio.
Question 3: A company sells a non-core division to focus resources on its primary business. This action is best described as:
- Horizontal acquisition
- Divestiture (Correct answer)
- Greenfield investment
- Joint venture formation
Correct answer: Divestiture
Divestiture involves selling off a business unit or division, often to sharpen strategic focus and redeploy capital.
Question 4: Which concept describes the additional value created when two merged companies are worth more together than as separate entities?
- Diversification discount
- Synergy (Correct answer)
- Cannibalization
- Diseconomy of scale
Correct answer: Synergy
Synergy occurs when combined operations generate more value—through cost savings, revenue growth, or capability sharing—than the sum of separate parts.
Question 5: A portfolio manager uses a 'parenting advantage' framework to evaluate whether corporate headquarters adds or destroys value for each business unit. This approach was developed by:
- Michael Porter
- Campbell, Goold, and Alexander (Correct answer)
- Kim and Mauborgne
- Kaplan and Norton
Correct answer: Campbell, Goold, and Alexander
Campbell, Goold, and Alexander developed the parenting advantage concept, arguing that the parent must add more value than any alternative owner.
Question 6: When a commercial manager applies scenario planning to a product portfolio, the primary objective is to:
- Predict exact future market conditions with statistical models
- Identify strategic responses to multiple plausible future environments (Correct answer)
- Set fixed performance targets for each business unit
- Eliminate uncertainty by hedging all financial exposures
Correct answer: Identify strategic responses to multiple plausible future environments
Scenario planning prepares the organization to respond effectively to different plausible futures rather than predicting one specific outcome.
Question 7: A 'portfolio gap' in strategic planning refers to:
- A missing product in the current lineup that competitors offer
- The difference between projected performance of the existing portfolio and the desired future state (Correct answer)
- Unfilled job positions within a business unit
- Variance between budgeted and actual revenue
Correct answer: The difference between projected performance of the existing portfolio and the desired future state
A portfolio gap is the shortfall between where the current business portfolio is heading and where the organization wants to be, driving strategic initiatives.
CCM Portfolio Management & Strategy 3
In the GE-McKinsey Nine-Box Matrix, a business unit rated 'high' on industry attractiveness and 'medium' on competitive strength should be: