Techniques for Diversification & Expansion MCQs With Answer

Introduction: This quiz collection on Techniques for Diversification & Expansion is tailored for M.Pharm students studying MIP 204T – Entrepreneurship Management. It focuses on strategic options pharmaceutical firms use to grow—product and market diversification, horizontal and vertical integration, licensing, joint ventures, mergers & acquisitions, contract manufacturing/research, and geographic expansion. Questions emphasize regulatory, operational and commercial considerations unique to the pharma sector: technology transfer, GMP scale-up, intellectual property, due diligence, synergies, and risk mitigation. These MCQs aim to reinforce conceptual clarity, support exam preparation, and encourage application of strategic tools (Ansoff, BCG) to real-world pharmaceutical growth scenarios.

Q1. Which diversification strategy involves a pharmaceutical company developing new products that are technologically related to its existing product lines to leverage existing R&D capabilities?

• Conglomerate diversification
• Concentric diversification
• Horizontal diversification
• Market development

Correct Answer: Concentric diversification

Q2. Which expansion technique is best described as acquiring a manufacturing firm that supplies active pharmaceutical ingredients (APIs) to achieve tighter supply chain control?

• Horizontal integration
• Backward vertical integration
• Forward vertical integration
• Conglomerate merger

Correct Answer: Backward vertical integration

Q3. In the Ansoff Matrix, which strategy focuses on selling existing pharmaceutical products into new geographic markets?

• Product development
• Diversification
• Market penetration
• Market development

Correct Answer: Market development

Q4. A pharmaceutical company licenses out rights to a patented drug to another firm in a different territory while retaining manufacturing—this arrangement is best classified as which technique?

• Out-licensing
• Equity joint venture
• Contract manufacturing
• Franchising

Correct Answer: Out-licensing

Q5. Which method of expansion commonly used in pharma minimizes capital investment by outsourcing clinical trial operations to a specialized organization?

• Co-marketing
• Contract research (CRO partnerships)
• Vertical integration
• Spin-off

Correct Answer: Contract research (CRO partnerships)

Q6. Which diversification approach poses the highest regulatory and scientific risk for a pharmaceutical firm due to entering unrelated industries?

• Concentric diversification
• Horizontal diversification
• Conglomerate diversification
• Backward integration

Correct Answer: Conglomerate diversification

Q7. When evaluating an acquisition target in pharma, which due diligence area is most critical to assess potential post-merger regulatory liabilities?

• Market share analysis
• Manufacturing compliance and regulatory records
• Employee satisfaction surveys
• Office lease terms

Correct Answer: Manufacturing compliance and regulatory records

Q8. A brand-extension in pharmaceuticals typically involves:

• Introducing a product in an unrelated consumer category
• Using an established drug brand to launch a closely related formulation or dosage form
• Acquiring a competitor to increase market share
• Divesting non-core business units

Correct Answer: Using an established drug brand to launch a closely related formulation or dosage form

Q9. Which strategic alliance model allows two pharma firms to co-develop a novel molecule while sharing development costs and future revenues?

• Licensing-in
• Co-development joint venture
• Franchise agreement
• Contract manufacturing

Correct Answer: Co-development joint venture

Q10. In portfolio management, which BCG quadrant would a mature, high-market-share blockbuster drug typically occupy?

• Question Marks
• Dogs
• Stars
• Cows (Cash Cows)

Correct Answer: Cows (Cash Cows)

Q11. Which expansion technique is most appropriate for rapidly entering multiple international markets while minimizing local regulatory burden and capital outlay?

• Greenfield wholly-owned subsidiaries
• Franchising to local non-pharma partners
• Strategic licensing and local partnerships
• Hostile takeover of local firms

Correct Answer: Strategic licensing and local partnerships

Q12. A pharmaceutical firm pursuing horizontal integration is primarily aiming to:

• Gain control over suppliers
• Enter upstream production of raw materials
• Acquire competitors or similar product lines to increase market share
• Diversify into unrelated consumer goods

Correct Answer: Acquire competitors or similar product lines to increase market share

Q13. Which risk is especially significant when a pharma company pursues rapid geographic expansion without adequate local regulatory expertise?

• Currency exchange rate risk only
• Reputational and non-compliance risk leading to market withdrawal
• Lower R&D productivity
• Loss of core manufacturing capability

Correct Answer: Reputational and non-compliance risk leading to market withdrawal

Q14. Out-licensing a molecule during early development is often chosen to:

• Increase capital expenditure on manufacturing
• Transfer development risk and obtain upfront and milestone payments
• Retain all future commercial rights globally
• Avoid any regulatory submissions

Correct Answer: Transfer development risk and obtain upfront and milestone payments

Q15. A spin-off in the pharmaceutical industry is most likely used to:

• Merge two unrelated business units
• Create a separate company for a non-core asset or R&D program
• Acquire a competitor’s product line
• Enter a joint venture with a supplier

Correct Answer: Create a separate company for a non-core asset or R&D program

Q16. Which concept describes cost advantages achieved when producing a wider range of related pharmaceutical products using shared facilities and expertise?

• Economies of scale
• Economies of scope
• Diseconomies of scale
• Price discrimination

Correct Answer: Economies of scope

Q17. When a pharma company acquires another to obtain a complementary product pipeline and reduce overlapping R&D, the expected benefit is termed:

• Regulatory arbitrage
• Operational redundancy
• Synergy
• Cannibalization

Correct Answer: Synergy

Q18. Which contractual expansion technique transfers manufacturing responsibilities to a specialist while the originator retains marketing control?

• Out-licensing of IP
• Contract manufacturing organization (CMO) agreement
• Equity merger
• Franchise model

Correct Answer: Contract manufacturing organization (CMO) agreement

Q19. In assessing potential M&A deals in pharma, what is the primary purpose of a technology transfer audit?

• To evaluate marketing strategies
• To ensure transferred processes can be reproduced at receiving sites under GMP
• To measure social media presence
• To negotiate employee contracts

Correct Answer: To ensure transferred processes can be reproduced at receiving sites under GMP

Q20. Which expansion approach can help a pharmaceutical firm quickly broaden its therapeutic portfolio while sharing regulatory and commercial risk with a partner?

• Building in-house capabilities only
• Strategic alliances or co-development agreements
• Divestment of core assets
• Conglomerate diversification into unrelated sectors

Correct Answer: Strategic alliances or co-development agreements

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