Question 1

When a firm simultaneously practices operational relatedness and corporate relatedness,

Accepted Answer

A)  it is difficult for investors to observe the value created by the firm.
B)  the firm is likely to be overvalued by investors.
C)  the firm will suffer from diseconomies of scope that outweigh cost savings generated.
D)  the firm is seeking to create value through financial economies.E) All of the above
F) C) and D)

Question 2

The main difference between the related constrained level of diversification and the related linked level of diversification is

Accepted Answer

A)  the percentage of total organizational profitability that comes from the dominant business.
B)  the level of resources and activities shared among the businesses.
C)  whether the diversification is vertical or horizontal.
D)  whether the diversification is value-creating or value-neutral.E) C) and D)
F) B) and D)

Question 3

If managers diversify a firm in a way that does not produce value,the firm risks capital market intervention.

Accepted Answer

A) True 
 B)False

Question 4

Since the 1950s,U.S. government policy regarding antitrust concerns has remained constant.

Accepted Answer

A) True 
 B)False

Question 5

Successful product diversification is expected to increase the variability in the firm's profitability since the earnings are generated from several different business units.

Accepted Answer

A) True 
 B)False

Question 6

Compared to diversification that is grounded in intangible resources,diversification based on financial resources only is more visible to competitors and thus more imitable and less likely to create value on a long-term basis.

Accepted Answer

A) True 
 B)False

Question 7

Firms seeking to create value through corporate relatedness use the related constrained strategy.

Accepted Answer

A) True 
 B)False

Question 8

PorkPride Foods produces hams and other meat products. It owns hog raising operations. This is an example of a
Business.

Accepted Answer

A)  de-integrated
B)  vertically integrated
C)  totally integrated
D)  horizontally integratedE) All of the above
F) C) and D)

Question 9

One method of facilitating the transfer of competencies between firms is to

Accepted Answer

A)  virtually integrate the two firms.
B)  transfer key people into new management positions.
C)  share support activities, such as purchasing practices.
D)  restructure the weaker firm to mirror the structure of the more successful firm.E) A) and D)
F) A) and C)

Question 10

Among the value-neutral incentives to diversify,some come from the firm's external environment while others are internal to the firm. External incentives to diversify include

Accepted Answer

A)  the fact that other firms in an industry are diversifying.
B)  pressure from stockholders who are demanding that the firm diversify.
C)  changes in antitrust regulations and tax laws.
D)  a firm's low performance.E) A) and B)
F) All of the above

Question 11

What is the effect of a firm's low performance on the pursuit of diversification?

Accepted Answer

High corporate performance eliminates the need for diversification. Some research shows that low returns are related to greater levels of diversification. Firms plagued by poor performance often diversify in an effort to become more profitable. But, continued poor performance following diversification may slow the pace of diversification and may lead to divestitures and a focus on the core business. In addition, firms that are more broadly diversified compared to their competitors may have lower overall performance. Figure 6.3 shows that the related constrained diversification strategy is the highest performing strategy. So poor performing firms that intend to diversify should look at purchasing businesses that would be suitable for this strategy rather than moving into unrelated diversification or retaining a dominant business strategy.

Question 12

It can be difficult for investors to actually observe the value created by a firm (such as Walt Disney)as it shares activities and transfers core competencies.

Accepted Answer

A) True 
 B)False

Question 13

Firms use corporate-level diversification strategies for all the following reasons EXCEPT

Accepted Answer

A)  value-creating.
B)  value-neutral.
C)  value-reducing.
D)  value-diversifying.E) A) and B)
F) All of the above D

Question 14

The term "conglomerates" refers to firms using the______diversification strategy.

Accepted Answer

A)  unrelated
B)  related constrained
C)  related linked
D)  globalE) B) and D)
F) None of the above

Question 15

The Publicis Groupe uses the digital technology from its digital business to enhance the advertising products in its advertising group. This sharing of activities is characteristic of the______diversification strategy.

Accepted Answer

A)  related constrained
B)  related linked
C)  unrelated
D)  dominantE) C) and D)
F) All of the above

Question 16

Firms using a related diversification strategy may gain market power when successfully using their related constrained or related linked strategy.

Accepted Answer

A) True 
 B)False

Question 17

Operational relatedness is created by______of

Accepted Answer

A)  sharing; core competencies.
B)  sharing; activities.
C)  transferring; core competencies.
D)  transferring; activities.E) A) and D)
F) B) and C)

Question 18

Because of the tax laws of the 1960s and 1970s,when dividends were taxed more heavily than capital gains,shareholders preferred that corporations

Accepted Answer

A)  pay dividends annually.
B)  keep free cash flows for investment in acquisitions.
C)  distribute capital gains regularly.
D)  increase managerial salaries.E) None of the above
F) A) and D) B

Question 19

Performance continues to increase as diversification increases from single business to unrelated diversification.

Accepted Answer

A) True 
 B)False

Question 20

Describe the primary reasons a firm pursues increased diversification.

Accepted Answer

Firms typically diversify to increase th...

Exam 6: Corporate-Level Strategy.

When a firm simultaneously practices operational relatedness and corporate relatedness,

Correct Answer
verified

The main difference between the related constrained level of diversification and the related linked level of diversification is

Correct Answer
verified

If managers diversify a firm in a way that does not produce value,the firm risks capital market intervention.

Correct Answer
verified

Since the 1950s,U.S. government policy regarding antitrust concerns has remained constant.

Correct Answer
verified

Successful product diversification is expected to increase the variability in the firm's profitability since the earnings are generated from several different business units.

Correct Answer
verified

Compared to diversification that is grounded in intangible resources,diversification based on financial resources only is more visible to competitors and thus more imitable and less likely to create value on a long-term basis.

Correct Answer
verified

Firms seeking to create value through corporate relatedness use the related constrained strategy.

Correct Answer
verified

PorkPride Foods produces hams and other meat products. It owns hog raising operations. This is an example of a Business.

Correct Answer
verified

One method of facilitating the transfer of competencies between firms is to

Correct Answer
verified

Among the value-neutral incentives to diversify,some come from the firm's external environment while others are internal to the firm. External incentives to diversify include

Correct Answer
verified

What is the effect of a firm's low performance on the pursuit of diversification?

It can be difficult for investors to actually observe the value created by a firm (such as Walt Disney)as it shares activities and transfers core competencies.

Correct Answer
verified

Firms use corporate-level diversification strategies for all the following reasons EXCEPT

Correct Answer
verified
D

The term "conglomerates" refers to firms using the______diversification strategy.

Correct Answer
verified

The Publicis Groupe uses the digital technology from its digital business to enhance the advertising products in its advertising group. This sharing of activities is characteristic of the______diversification strategy.

Correct Answer
verified

Firms using a related diversification strategy may gain market power when successfully using their related constrained or related linked strategy.

Correct Answer
verified

Operational relatedness is created by______of

Correct Answer
verified

Because of the tax laws of the 1960s and 1970s,when dividends were taxed more heavily than capital gains,shareholders preferred that corporations

Correct Answer
verified
B

Performance continues to increase as diversification increases from single business to unrelated diversification.

Correct Answer
verified

Describe the primary reasons a firm pursues increased diversification.

Correct Answer
verified
Firms typically diversify to increase th...
View Answer

Exam 6: Corporate-Level Strategy.

When a firm simultaneously practices operational relatedness and corporate relatedness,

Correct AnswerverifiedShow Answer

The main difference between the related constrained level of diversification and the related linked level of diversification is

Correct AnswerverifiedShow Answer

If managers diversify a firm in a way that does not produce value,the firm risks capital market intervention.

Correct AnswerverifiedShow Answer

Since the 1950s,U.S. government policy regarding antitrust concerns has remained constant.

Correct AnswerverifiedShow Answer

Successful product diversification is expected to increase the variability in the firm's profitability since the earnings are generated from several different business units.

Correct AnswerverifiedShow Answer

Compared to diversification that is grounded in intangible resources,diversification based on financial resources only is more visible to competitors and thus more imitable and less likely to create value on a long-term basis.

Correct AnswerverifiedShow Answer

Firms seeking to create value through corporate relatedness use the related constrained strategy.

Correct AnswerverifiedShow Answer

PorkPride Foods produces hams and other meat products. It owns hog raising operations. This is an example of a Business.

Correct AnswerverifiedShow Answer

One method of facilitating the transfer of competencies between firms is to

Correct AnswerverifiedShow Answer

Among the value-neutral incentives to diversify,some come from the firm's external environment while others are internal to the firm. External incentives to diversify include

Correct AnswerverifiedShow Answer

What is the effect of a firm's low performance on the pursuit of diversification?

It can be difficult for investors to actually observe the value created by a firm (such as Walt Disney)as it shares activities and transfers core competencies.

Correct AnswerverifiedShow Answer

Firms use corporate-level diversification strategies for all the following reasons EXCEPT

Correct AnswerverifiedD

The term "conglomerates" refers to firms using the______diversification strategy.

Correct AnswerverifiedShow Answer

The Publicis Groupe uses the digital technology from its digital business to enhance the advertising products in its advertising group. This sharing of activities is characteristic of the______diversification strategy.

Correct AnswerverifiedShow Answer

Firms using a related diversification strategy may gain market power when successfully using their related constrained or related linked strategy.

Correct AnswerverifiedShow Answer

Operational relatedness is created by______of

Correct AnswerverifiedShow Answer

Because of the tax laws of the 1960s and 1970s,when dividends were taxed more heavily than capital gains,shareholders preferred that corporations

Correct AnswerverifiedB

Performance continues to increase as diversification increases from single business to unrelated diversification.

Correct AnswerverifiedShow Answer

Describe the primary reasons a firm pursues increased diversification.

Correct AnswerverifiedFirms typically diversify to increase th...View AnswerShow Answer

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D

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B

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Firms typically diversify to increase th...
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