Chapter 7 - Corporate Diversification

Question 1 of 49

1

A firm implements a ________ when it operates in multiple industries or markets simultaneously.

Select one of the following:

vertical integration strategy
corporate diversification strategy
business diversification strategy
product-differentiation strategy

Explanation

Question 2 of 49

1

When a firm operates in multiple industries simultaneously, it is said to be implementing a

Select one of the following:

product diversification strategy.
product-differentiation strategy.
geographic market diversification strategy.
geographic market differentiation strategy.

Explanation

Question 3 of 49

1

When a firm operates in multiple geographic markets simultaneously it is said to be implementing a(n)

Select one of the following:

international diversification strategy.
product-differentiation strategy.
geographic market diversification strategy.
geographic market differentiation strategy.

Explanation

Question 4 of 49

1

When a firm simultaneously implements both a product diversification strategy and a geographic market diversification strategy it is said to be implementing a(n)

Select one of the following:

mixed-market diversification strategy.
unrelated-diversification strategy.
product-differentiation strategy.
product-market diversification strategy.

Explanation

Question 5 of 49

1

A firm has implemented a strategy of ________ when all or most of its activities fall within a single industry and geographic market.

Select one of the following:

limited corporate diversification
related diversification
unrelated diversification
related-linked diversification

Explanation

Question 6 of 49

1

In which type of limited corporate diversification do firms have greater than 95% of their total sales in a single product market?

Select one of the following:

dominant-business firms
single-business firms
related-constrained firms
related-linked firms

Explanation

Question 7 of 49

1

Firms pursuing ________ have between 70% and 95% of their sales in a single product market.

Select one of the following:

dominant-business diversification
single-business diversification
related-constrained diversification
related-linked diversification

Explanation

Question 8 of 49

1

The analysis of firms pursuing a strategy of ________ is logically equivalent to the analysis of business-level strategies.

Select one of the following:

unrelated diversification
related-linked diversification
related-constrained diversification
limited corporate diversification

Explanation

Question 9 of 49

1

Firms such as PepsiCo that operate a number of businesses around the world that share a number of inputs, production technologies, or distribution channels but none of whose businesses account for more than 70% of a firm's revenues are said to be implementing a

Select one of the following:

related-constrained diversification.
related-linked diversification.
dominant-business diversification.
single-business diversification.

Explanation

Question 10 of 49

1

Firms such as Disney that own and operate businesses that share a limited number of inputs, production technologies or distribution channels are said to be pursuing a ________ corporate diversification strategy.

Select one of the following:

related-constrained
related-linked
dominant-business
single-business

Explanation

Question 11 of 49

1

Firms such as General Electric that generate less than 70% of their revenues from a single product market and whose businesses share few, if any, common attributes are said to be pursuing ________ corporate diversification.

Select one of the following:

limited
related-linked
related-constrained
unrelated

Explanation

Question 12 of 49

1

In order for corporate diversification to be economically valuable

Select one of the following:

there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be more costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
there must not be any valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
there must not be any valuable economy of scope among the multiple businesses in which a firm is operating and it must be more costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.

Explanation

Question 13 of 49

1

When the value of the products or services a firm sells increases as a function of the number of business that the firm operates in, ________ are said to exist.

Select one of the following:

economies of scope
vertical economies
economies of scale
diseconomies of scope

Explanation

Question 14 of 49

1

Which of the following statements regarding economies of scope is accurate?

Select one of the following:

Only firms pursuing single-business diversification can exploit economies of scope.
Only firms pursuing related-constrained diversification can exploit economies of scope.
Only firms not pursuing diversification can exploit economies of scope.
Only diversified firms can exploit economies of scope.

Explanation

Question 15 of 49

1

Currently, most scholars believe that exploiting economies of scope through corporate diversification, on average,

Select one of the following:

destroyed about 25% of a firm's market value.
had no impact on a firm's market value.
destroyed about 55% of a firm's market value.
increased a firm's market value.

Explanation

Question 16 of 49

1

Which type of economies of scope includes shared activities and core competencies?

Select one of the following:

operational economies of scope
financial economies of scope
anticompetitive economies of scope
employee and stakeholder incentives for diversification

Explanation

Question 17 of 49

1

If a diversified firm had three businesses and these companies shared a common marketing and service operation, as well as common technology and development, this would be an example of which type of economy of scope?

Select one of the following:

core competencies
shared activities
risk reduction
multipoint competition

Explanation

Question 18 of 49

1

Shared activities are quite common between both and diversified firms.

Select one of the following:

single-business; dominant-business
related-constrained; single-business
related-linked; dominant-business
related-constrained; related-linked

Explanation

Question 19 of 49

1

Limits of activity sharing include

Select one of the following:

substantial organizational issues that are often associated with a diversified firm's learning how to manage cross-business relationships and in which failure can lead to excess bureaucracy, inefficiency, and organizational gridlock.
a significant reduction in an organization's innovation and flexibility.
substantial organizational issues related to adequately compensating personnel across businesses and setting transfer prices.
a significant reduction in an organization's ability to meet the needs of any of its customers.

Explanation

Question 20 of 49

1

________ are complex sets of resources and capabilities that link different businesses in a diversified firm through managerial and technical know-how, experience and wisdom.

Select one of the following:

Managerial competencies
Core competencies
Competitive advantages
Core advantages

Explanation

Question 21 of 49

1

A firm that diversifies by exploiting its resources and capability advantages in its original business will have costs than (as) firms that begin a new business without these resource and capability advantages, or revenues than (as) firms lacking these advantages.

Select one of the following:

higher; lower
the same; higher
lower; the same
lower; higher

Explanation

Question 22 of 49

1

If all of a firm's businesses share the same core competencies, then that firm has implemented a strategy of ________ diversification.

Select one of the following:

single-business
related-linked
related-constrained
dominant-business

Explanation

Question 23 of 49

1

Diversified firms that are exploiting core competencies as an economy of scope but are not doing so with any shared activities are sometimes called ________ diversified firms.

Select one of the following:

seemingly unrelated
unrelated
semi-related
link-related

Explanation

Question 24 of 49

1

A common way of thinking about strategy across different businesses within a firm is known as the firm's

Select one of the following:

core competency.
competitive advantage.
economy of scope.
dominant logic.

Explanation

Question 25 of 49

1

In general, as a source of capital a diversified firm has ________ information about a business that it owns compared to external sources of capital.

Select one of the following:

more and better
the same
less and inferior
more but biased

Explanation

Question 26 of 49

1

Compared to two very risky businesses that have cash flows that are not highly correlated over time and that are operating separately, the risk of a diversified firm operating in those same two businesses simultaneously is

Select one of the following:

somewhat higher.
lower.
the same.
substantially higher.

Explanation

Question 27 of 49

1

________ exists when two or more diversified firms simultaneously compete in multiple markets.

Select one of the following:

Multipoint competition
Dynamic competition
Multipoint cooperation
Dynamic cooperation

Explanation

Question 28 of 49

1

For multipoint competition to lead to mutual forbearance,

Select one of the following:

the threat of retaliation must be substantial and the firms pursuing this strategy must have strong linkages among their diversified businesses.
the threat of retaliation must be low and the firms pursuing this strategy must have strong linkages among their diversified businesses.
the threat of retaliation must be low and the firms pursuing this strategy must have weak linkages among their diversified businesses.
the threat of retaliation must be substantial and the firms pursuing this strategy must have weak linkages among their diversified businesses.

Explanation

Question 29 of 49

1

When diversified firms use the revenues from profitable businesses to subsidize the operations of another business and then set the prices of the subsidized firm's products at a level that is below the subsidized business's cost to produce these items, this is known as ________ pricing.

Select one of the following:

dynamic
monopoly
predatory
beneficial

Explanation

Question 30 of 49

1

Research over the years has demonstrated conclusively that the primary determinant of the compensation of top managers in a firm is

Select one of the following:

not the size of the firm, usually measured in sales, but the economic performance of the firm.
both the economic performance of the firm as well as the size of the firm, usually measured in sales.
not the economic performance of the firm but the size of the firm, usually measured in sales.
neither the economic performance of the firm nor the size of the firm.

Explanation

Question 31 of 49

1

Which of the following economies of scope do not have the potential for generating positive returns for a firm's equity holders since the economies of scope can be realized by outside equity holders at a low cost by investing in a diversified portfolio of stock?

Select one of the following:

shared activities
diversification to maximize the size of a firm
internal capital allocation
exploiting market power

Explanation

Question 32 of 49

1

The only economy of scope that an unrelated firm can try to realize is

Select one of the following:

core competencies.
tax advantages.
multipoint competition.
risk reduction.

Explanation

Question 33 of 49

1

Which of the following economies of scope is costly to duplicate?

Select one of the following:

shared activities
internal capital allocation
risk reduction
tax advantages

Explanation

Question 34 of 49

1

Which of the following economies of scope is less costly to duplicate?

Select one of the following:

employee compensation
core competencies
multipoint competition
exploiting market power

Explanation

Question 35 of 49

1

Substitutes for exploiting economies of scope in diversification include

Select one of the following:

growing and developing independent businesses within a diversified firm and vertical integration.
vertical integration and strategic alliances.
growing and developing independent businesses within a diversified firm and strategic alliances.
strategic alliances and multipoint competition.

Explanation

Question 36 of 49

1

Which of the following statements regarding the rarity of diversification is accurate?

Select one of the following:

If only a few competing firms have exploited a particular economy of scope, that economy of scope can be rare.
A particular economy of scope can only be rare if no other firms are exploiting that economy of scope.
A particular economy of scope can be rare even if many other firms are exploiting that economy of scope.
If only a few competing firms have exploited a particular economy of scope, that economy of scope can be rare but only if the firm is pursuing unrelated diversification.

Explanation

Question 37 of 49

1

Which of the following economies of scope is costly-to-duplicate?

Select one of the following:

employee compensation
core competencies
shared activities
risk reduction

Explanation

Question 38 of 49

1

________ is an example of a less costly-to-duplicate economies of scope.

Select one of the following:

Tax advantages
Core competencies
Internal capital allocation
Multipoint competition

Explanation

Question 39 of 49

1

________ are substitutes for exploiting economies of scope in diversification.

Select one of the following:

Tax havens
Tax shelters
Tax freedom
Strategic alliances

Explanation

Question 40 of 49

1

In 2001, Peach Computers' diversification strategy was best characterized as

Select one of the following:

related-linked diversification.
dominant-business diversification.
single-business diversification.
related-constrained diversification.

Explanation

Question 41 of 49

1

By 2003, Peach Computers' diversification strategy was best characterized as

Select one of the following:

unrelated diversification.
related-constrained diversification.
related-linked diversification.
dominant-business diversification.

Explanation

Question 42 of 49

1

Which type of economies of scope is Peach Computers experiencing between its units?

Select one of the following:

shared activities
core competencies
multipoint competition
tax advantages

Explanation

Question 43 of 49

1

One of the limits of the economies of scope that Peach Computers is leveraging in its diversification strategy is

Select one of the following:

they may limit the ability of a particular business to meet specific customers' needs.
they are significantly affected by the way a diversified firm is organized.
they are not tangible and may be reflected only in the shared knowledge, experience and wisdom across businesses.
the level and type of diversification that a firm pursues can affect the efficiency of this allocation process.

Explanation

Question 44 of 49

1

If one of the reasons that Peach Computers entered into the electronics industry was to offset weakness in the computer industry because when the computer industry was weak, the electronics industry was strong, and vice versa, Peach Computers would be pursuing which economy of scope?

Select one of the following:

core competencies
multipoint competition
tax advantages
risk reduction

Explanation

Question 45 of 49

1

If, when Peach Computers introduced its PeachPit in 2001, the company used its profits in the computer industry to subsidize its operations in the electronics industry and used this subsidy to sell the PeachPit for a price that was less than the cost of producing and selling the MP3 players, this would be an example of

Select one of the following:

mutual forbearance.
escalation of commitment.
predatory pricing.
multipoint competition.

Explanation

Question 46 of 49

1

Peach Computers' equity holders, its employees, suppliers and customers along with all of those groups and individuals who have an interest in how Peach Computers performs are referred to as

Select one of the following:

focal groups.
stakeholders.
supporters
stockholders.

Explanation

Question 47 of 49

1

If no other firm in the computer industry were using a diversification strategy similar to Peach Computers', this diversification strategy could be said to be

Select one of the following:

rare and costly to duplicate.
rare and less costly to duplicate.
common but costly to duplicate.
common and less costly to duplicate.

Explanation

Question 48 of 49

1

In 2001, if Peach Computers did not want to employ a diversification strategy to enter the personal electronics industry, it could use which substitute for diversification?

Select one of the following:

backward vertical integration
product differentiation
strategic alliances
forward vertical integration

Explanation

Question 49 of 49

1

If Peach Computers were looking to getting into the business of making telephones, its diversification would be called

Select one of the following:

related-linked.
related-constrained.
related-corporate.
unrelated.

	Created by Strategy IO over 7 years ago

Quiz on Chapter 7 - Corporate Diversification , created by Strategy IO on 14/11/2016.

Chapter 7 - Corporate Diversification

Question 1 of 49

A firm implements a ________ when it operates in multiple industries or markets simultaneously.

Select one of the following:

Explanation

Question 2 of 49

When a firm operates in multiple industries simultaneously, it is said to be implementing a

Select one of the following:

Explanation

Question 3 of 49

When a firm operates in multiple geographic markets simultaneously it is said to be implementing a(n)

Select one of the following:

Explanation

Question 4 of 49

When a firm simultaneously implements both a product diversification strategy and a geographic market diversification strategy it is said to be implementing a(n)

Select one of the following:

Explanation

Question 5 of 49

A firm has implemented a strategy of ________ when all or most of its activities fall within a single industry and geographic market.

Select one of the following:

Explanation

Question 6 of 49

In which type of limited corporate diversification do firms have greater than 95% of their total sales in a single product market?

Select one of the following:

Explanation

Question 7 of 49

Firms pursuing ________ have between 70% and 95% of their sales in a single product market.

Select one of the following:

Explanation

Question 8 of 49

The analysis of firms pursuing a strategy of ________ is logically equivalent to the analysis of business-level strategies.

Select one of the following:

Explanation

Question 9 of 49

Firms such as PepsiCo that operate a number of businesses around the world that share a number of inputs, production technologies, or distribution channels but none of whose businesses account for more than 70% of a firm's revenues are said to be implementing a

Select one of the following:

Explanation

Question 10 of 49

Firms such as Disney that own and operate businesses that share a limited number of inputs, production technologies or distribution channels are said to be pursuing a ________ corporate diversification strategy.

Select one of the following:

Explanation

Question 11 of 49

Firms such as General Electric that generate less than 70% of their revenues from a single product market and whose businesses share few, if any, common attributes are said to be pursuing ________ corporate diversification.

Select one of the following:

Explanation

Question 12 of 49

In order for corporate diversification to be economically valuable

Select one of the following:

Explanation

Question 13 of 49

When the value of the products or services a firm sells increases as a function of the number of business that the firm operates in, ________ are said to exist.

Select one of the following:

Explanation

Question 14 of 49

Which of the following statements regarding economies of scope is accurate?

Select one of the following:

Explanation

Question 15 of 49

Currently, most scholars believe that exploiting economies of scope through corporate diversification, on average,

Select one of the following:

Explanation

Question 16 of 49

Which type of economies of scope includes shared activities and core competencies?

Select one of the following:

Explanation

Question 17 of 49

If a diversified firm had three businesses and these companies shared a common marketing and service operation, as well as common technology and development, this would be an example of which type of economy of scope?

Select one of the following:

Explanation

Question 18 of 49

Shared activities are quite common between both ________ and ________ diversified firms.

Select one of the following:

Explanation

Question 19 of 49

Limits of activity sharing include

Select one of the following:

Explanation

Question 20 of 49

________ are complex sets of resources and capabilities that link different businesses in a diversified firm through managerial and technical know-how, experience and wisdom.

Shared activities are quite common between both and diversified firms.

A firm that diversifies by exploiting its resources and capability advantages in its original business will have costs than (as) firms that begin a new business without these resource and capability advantages, or revenues than (as) firms lacking these advantages.