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| Corporate-level strategy is concerned with ____ and how to manage these businesses. a. whether the firm should invest in global or domestic businesses b. what product markets and businesses the firm should be in | b. what product markets and businesses the firm should be in |
| The ultimate test of the value of a corporate-level strategy is whether the: a. corporation earns a great deal of money. b. top management team is satisfied with the corporation's performance. c. businesses in the portfolio | c. businesses in the portfolio are worth more under the management of the company in question than they would be under any other ownership. |
| The more "constrained" the relatedness of diversification: a. the fewer the linkages between the businesses within the portfolio owned by the firm. b. the wider the variation i c. the more links there a | c. the more links there are among the businesses owned by an organization. |
| Wm. Wrigley Jr. Company once made only chewing gum a. was moving away from its traditional single-business strategy toward a dominant strategy. b. was moving away from its traditional dominant strategy toward a related linked strategy. | a. was moving away from its traditional single-business strategy toward a dominant strategy. |
| Usually a company is classified as a single business firm when revenues generated by the dominant business are greater than ____ percent. a. 99 b. 95 c. 90 d. 70 | b. 95 |
| The more sharing of resources and activities among businesses, the more ____ is the relatedness of the diversification. a. linked b. constrained c. integrated d. intense | b. constrained |
| A firm that earns less than 70 percent of revenue from its dominant business and has direct connections between its businesses is engaging in ____ diversification. a. unrelated b. related constrained c. related linked | b. related constrained |
| Revenues for United Parcel Service (UPS) come from the following business segments: 60 percent from U.S. package delivery operations, 22 percent fro a. single business b. dominant business c. related constrained d. related linked | b. dominant business |
| Which acquisition would be considered the LEAST related? a. A candy manufacturer b. A chain of garden centers c. A hospital acquires a long-term care nursing home. d. An upscale "white-tablecloth" | d. An upscale "white-tablecloth" restaurant chain acquires a travel agency. |
| The lowest level of diversification is the ____ level. a. single-business b. dominant business c. related constrained d. unrelated | a. single-business |
| The main difference between the related constrained level of diversification and the related linked level o: a. the percentage of total organizational profitability b. the level of resources and activities shared among the businesses. | b. the level of resources and activities shared among the businesses. |
| The Publicis Groupe has three major groups of business (advertising, media, and digital) that share resources and capabilities. Publicis Grou a. related linked b. related constrained c. unrelated d. dominant | b. related constrained |
| The Publicis Groupe uses the digital technology from its digital business to enhance the advertising products in its advertising group. a. related constrained b. related linked c. unrelated d. dominant | a. related constrained |
| The term "conglomerates" refers to firms using the ____ diversification strategy. a. unrelated b. related constrained c. related linked d. global | a. unrelated |
| Hutchison Whampoa Limited (HWL) has businesses in ports and related services, telecommunications, prop a. dominant business b. related constrained c. related linked d. unrelated | d. unrelated |
| Firms use corporate-level diversification strategies for all the following reasons EXCEPT: a. value-creating. b. value-neutral. c. value-reducing. d. value-diversifying. | d. value-diversifying. |
| Which of the following reasons for diversification is most likely to increase the firm's value? a. Increasing managerial compensation b. Reducing costs through business restructuring c. Taking advantage of changes in tax laws | b. Reducing costs through business restructuring |
| Which of the following is a value-reducing reason for diversification? a. Enhancing the strategic competitiveness of the entire company b. Expanding the business portfolio in order to diversify managerial employment risk | b. Expanding the business portfolio in order to diversify managerial employment risk |
| An office management firm has developed a system for efficiently organizing small medical and dental practices both through proprietary software an a. achieve economies of scope. b. implement vertical integration. | a. achieve economies of scope.m |
| Firms that have selected a related diversification corporate-level strategy seek to exploit: a. control shared among business-unit managers. b. economies of scope between business units. c. the favorable demand of buyers. d. market power. | b. economies of scope between business units. |
| Firms seek to create value from economies of scope through all of the following EXCEPT: a. activity sharing. b. skill transfers. c. transfers of corporate core competencies. d. de-integration. | d. de-integration. |
| The basic types of operational economies through which firms s a. synergies between internal and external capital markets. b. the leveraging of individual tangible resources. c. the sharing of value chain activities and support functions. | c. the sharing of value chain activities and support functions. |
| Operational relatedness is created by ___________ of ___________. a. sharing; core competencies b. sharing; activities c. transferring; core competencies d. transferring; ac | b. sharing; activities |
| Procter & Gamble (P&G) has a paper towel and baby diaper business, both of which use paper products. a. related constrained; operational relatedness b. related linked; corporate relatedness c. related constrained; corporate relatedness | a. related constrained; operational relatedness |
| Which of the following is TRUE? a. Conglomerates no longer exist in the U.S. b. Unrelated diversified firms seek to c. The sharing of intangible resources, d. Related constrained firms share more | d. Related constrained firms share more tangible resources and activities between businesses than do related linked firms. |
| Research has shown that horizontal acquisitions a. tend to have disappointing financial results in the long run. b. are being replaced c. result in lower levels of performance d. are able to use activity sharing to su | d. are able to use activity sharing to successfully create economies of scope. |
| A noted professional art academy has founded an "artists and friends" a. operational b. corporate c. intellectual d. constrained | a. operational |
| Dragonfly, publishers of children's books, has purchased White Rabbit, another publisher of children's books. a. This is a horizontal acquisition. b. This is an example of virtual integration. | a. This is a horizontal acquisition. |
| The purchasing of firms in the same industry is called: a. unrelated diversification. b. vertical integration. c. networking the organization. d. horizontal acquisition. | d. horizontal acquisition. |
| The _________________diversification strategy creates value in two ways. First, because the core competency has already been developed in one business a. related constrained b. unrelated c. related linked d. dominant business | c. related linked |
| The drawbacks to transferring competencies by moving key people into new management positions include all of these EXCEPT: a. the people involved may not want to move. b. managerial competencies are not | b. managerial competencies are not easily transferable to different organizational cultures. |
| Multipoint competition occurs when: a. firms have multiple retail outlets. b. firms have multiple products in their primary industry. c. diversified firms compete against each other in several markets. | c. diversified firms compete against each other in several markets. |
| One method of facilitating the transfer of competencies between firms is to: a. virtually integrate the two firms. b. transfer key people into new management positions. c. share support activities, such as purchasing practices. | b. transfer key people into new management positions. |
| Equator, a U.S. manufacturer of pharmaceuticals, has acquired a. The St. Louis manager may quit Equator in order to remain in St. Louis. b. American pharmaceutical manufacturing c. Irish managers will refuse d. The cost of transferring | a. The St. Louis manager may quit Equator in order to remain in St. Louis. |
| . Acquisitions to increase market power require that the firm have a(n) ____ diversification strategy. a. unrelated b. related c. dominant-business d. single-business | b. related |
| When diversification results in two companies, such as UPS and FedEx, simultaneously competing in the same product areas or geographic markets, this is called ____ competition. a. multiple b. multiportal c. multipoint d. multiplicit | c. multipoint |
| Virgin Group successfully transfers its marketing core competence across airlines, cosmetics, music, drinks, mobile phones, health clubs, and a number of othe a. dominant-business b. related constrained c. related linked d. unrelated | c. related linked |
| The Mars acquisition of the Wrigley assets was part of its related constrained diversification and ad a. multipoint competition b. virtual integration c. market power | c. market power |
| Backward integration occurs when a company: a. produces its own inputs. b. owns its own source of distribution of outputs. c. is concentrated in a single industry. d. is divesting unrelated businesses. | a. produces its own inputs. |
| PorkPride Foods produces hams and other meat products. It owns hog raising operations. This is an example of a business that is: a. reducing vertical integration. b. vertically integrated. c. totally integrated. | b. vertically integrated. |
| A company pursuing vertical integration can gain market power over its competitors through all of the following EXCEPT: a. improved adjustment to technological changes. b. savings on operations costs. c. improved product quality. | a. improved adjustment to technological changes. |
| Which of the following is NOT a limitation directly relating to vertical integration? a. Bureaucratic costs b. The loss of flexibility c. Capacity balance d. Imitation of core technology by potential competitors | d. Imitation of core technology by potential competitors |
| Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve a. backward integration. b. forward integration. c. horizontal integration. d. virtual integration. | a. backward integration. |
| Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the hig a. Specialty Steel has less flexibility b. This is an example of a capacity balance problem. c. This is a result of conflicts | a. Specialty Steel has less flexibility now than if it were not vertically integrated. |
| The Walt Disney Company has successfully used related diversification to create value by: a. sharing activities. b. sharing activities and transferring core competencies. c. transferring core competencies. | b. sharing activities and transferring core competencies. |
| The value of the assets of a firm using a diversification strategy to create both operational and corporate relatedness tend to be: a. discounted by investors. b. inflated by investors. c. completely ignored by investors. | a. discounted by investors. |
| 106. When a firm simultaneously practices operational relatedness and corporate relatedness: a. it is difficult for investors to observe the value created by the firm. b. the firm is likely to be overvalued by investors. | a. it is difficult for investors to observe the value created by the firm. |
| Which type of diversification is most likely to create value through financial economies? a. Related constrained b. Operational and corporate relatedness c. Unrelated d. Related linked | c. Unrelated |
| An ability to efficiently allocate capital through an internal market may help the firm protect the competitive advantages it develops: a. through reduced disclosure to outside parties. b. by the ability to not report losses to investors. | a. through reduced disclosure to outside parties. |
| A firm practicing unrelated diversification can make better capital allocations to its subsidiary businesses than the external a. corporate headquarters b. corporate headquarters has more c. the firm can acquire other firms | c. the firm can acquire other firms with innovative products instead of allocating capital to research and development. |
| Large diversified businesses often face what is known as the "conglomerate discount." This discount means that investors: a. understand that the financial b. believe that the value of conglomerates | b. believe that the value of conglomerates is less than the value of the sum of their parts. |
| . Large diversified businesses often face a _______________, which results from analysts not knowing how to value a vast array o b. high CEO turnover c. threat of takeover d. conglomerate discount | d. conglomerate discount |
| Successful unrelated diversification through restructuring is typically accomplished by: a. focusing on mature, low-technology businesses. b. a "random walk" of good luck in picking firms to buy. | a. focusing on mature, low-technology businesses. |
| The risk for firms that follow the unrelated diversification strategy in developed economies is that: a. external investors tend to b. conglomerates are typically c. government regulations d. competitors can imitate | d. competitors can imitate financial economies more easily than they imitate economies of scope. |
| What is the similarity between high-technology firms and service-based firms that makes them risky as restructuring candidates? a. They are dependent on human resources. b. They have few tangible assets. | a. They are dependent on human resources. |
| Which of the following firms would be the most likely to be a successful candidate for acquisition and restructuring? a. A medical practice b. A management consulting firm that c. A tire manufacturer established in 1910 | c. A tire manufacturer established in 1910 |
| Among the value-neutral incentives to diversify, some come from the firm's external environment a. the fact that other firms b. pressure from stockholders c. changes in antitrust regulations and tax laws. d. a firm's low performance. | c. changes in antitrust regulations and tax laws. |
| Of the value-neutral incentives to diversify, all of the following are internal firm incentives EXCEPT: a. overall firm risk reduction. b. uncertain future cash flows. c. stricter interpretation of antitrust laws. d. low performance. | c. stricter interpretation of antitrust laws. |
| Because of the tax laws of the 1960s and 1970s, when dividends were taxed more heavily than capital gains, shareholders preferred that corporations: a. pay dividends annually. b. keep free cash flows for investment in acquisitions. | b. keep free cash flows for investment in acquisitions. |
| Free cash flows are: a. liquid financial assets for which investments in current businesses are no longer economically viable. b. liquid financial assets that for tax purposes must be reinvested in the firm if not | a. liquid financial assets for which investments in current businesses are no longer economically viable. |
| Certain regulatory changes (such as antitrust regulation and tax laws) create incentives or disincentives for diversification that: a. create value. b. reduce value. c. are value-neutral. d. are managerial motives to diversify. | c. are value-neutral. |
| The curvilinear relationship of corporate performance and diversification indicates that: a. dominant-business corporate strategies b. the highest performing business strategy c. the less related the businesses acquired, | b. the highest performing business strategy is related constrained diversification. |
| As the threat of corporate failure increases due to relatedness between a firm's business units, firms may decide to: a. increase the firm's level of retained resources. b. diversify into less risky environments. | b. diversify into less risky environments. |
| Synergy exists when: a. cost savings b. two units create c. firms utilize constrained d. the value created | d. the value created by business units working together exceeds the value the units create when working independently. |
| The downside of synergy in a diversified firm is: a. increasing independence of businesses. b. the reduction of activity sharing. c. excessive focus on risky innovation. d. the loss of flexibility. | d. the loss of flexibility. |
| The Cherrywood Fine Furniture Company finds itself with excess capacity in its plant and equip a. unrelated diversification. b. related diversification projects. c. corporate restructuring. d. multipoint competition | b. related diversification projects. |
| Which of the following resources are more likely to create value in the diversification process? a. Plant and equipment b. Tacit knowledge c. Excess capacity d. Financial resources | b. Tacit knowledge |
| Compared with diversification based on intangible resources, diversification based on b. more imitable and less likely to create value on a long-term basis. d. more imitable and more likely to create value on a long-term basis. | b. more imitable and less likely to create value on a long-term basis. |
| Managerial motives to seek diversification include a desire to: a. improve their marketability to other firms. b. effectively use corporate resources. c. provide higher returns to corporate stakeholders. d. increase their compensation. | d. increase their compensation. |
| Isidore Crocker, CEO of Gotham Engines, a. a successful acquisition will increase the CEO's power over the Board of Directors. b. making an acquisition is . c. higher CEO pay is related to larger organization size. | c. higher CEO pay is related to larger organization size. |
| During the 1990s top executives of Titanic, Inc., followed a pattern of aggressive acquisitions and diversification. a. plan to take poison pills. b. have golden parachutes. c. have silver handcuffs. d. have ironclad contracts. | b. have golden parachutes. |
| Which of the following is NOT a governance mechanism that may limit managerial tendencies to over-diversify? a. The market for corporate control b. The Board of Directors c. Surveillance technologies d. Executive compensation practices | c. Surveillance technologies |
| In making a decision to diversify, managers should use value-creating reasons or face the risk that their firms will be acquire a. Economies of scope b. Desire for increased compensation c. Reduced managerial risk d. Low performance | a. Economies of scope |
| Research suggests that__has decreased while __has increased possibly due to the restructuring that took place in the 1990s c. related diversification; unrelated diversification d. unrelated diversification; related diversification | d. unrelated diversification; related diversification |
What is unrelated diversification strategy?
Unrelated Diversification —Diversifying into new industries, such as Amazon entering the grocery store business with its purchase of Whole Foods. Geographic Diversification —Operating in various geographic markets, which is the corporate strategy of Starbucks, Target, and KFC.
Which organizational design is used when unrelated diversification is implemented?
The H-form design is used to implement a strategy of unrelated diversification. Advantages: H-form design allows the organization to protect itself from cyclical fluctuations in a single industry, and the organization can buy and sell its individual businesses with little or no disruption to those that remain.
What are the two ways that an unrelated diversification strategy can create value?
The benefits of unrelated diversification are rooted in two conditions: (1) increased efficiency in cash management and in allocation of investment capital and (2) the capability to call on profitable, low-growth businesses to provide the cash flow for high-growth businesses that require significant infusions of cash.
What is unrelated diversified company?
Meaning of Unrelated Diversification. Unrelated diversification involves entering into new businesses that are not related to the core business of the company. An unrelated diversified company has, under a single corporate umbrella, more than one business- units which operate their activities in different industries.