Question 1

As noted in the Chapter 6 Opening Case, GE is now a major player in the "clean energy" industry such as wind turbines and solar power. A major reason GE moved in this direction was_____________________________.

Accepted Answer

A)   to narrow the focus of its portfolio around energy-relted industries.
B)   to overcome and correct its record in environmental issues.
C)   to further diversify its portfolio away from services.
D)   the clean energy industry was guaranteed to be profitable for the next severl years.E) A) and C)
F) C) and D)

Question 2

Which of the following is TRUE?

Accepted Answer

A)   Conglomerates no longer exist in the U.S. business scene, but are common in emerging markets.
B)   Unrelated diversified firms seek to create value through economies of scope.
C)   The sharing of intangible resources, such as know-how, between firms is a type of operational sharing in related diversifications.
D)   Related constrained firms share more tangible resources and activities between businesses than do related linked firms.E) None of the above
F) A) and C)

Question 3

The value of the assets of a firm using a diversification strategy to create both operational and corporate relatedness tend to be

Accepted Answer

A)   discounted by investors.
B)   inflated by investors.
C)   completely ignored by investors.
D)   highly valued by investors.E) A) and B)
F) A) and C)

Question 4

Research suggests that _______________has decreased while ___________has increased possibly due to the restructuring that took place in the 1990s and early twenty-first century.

Accepted Answer

A)   forward vertical integration; backward vertical integration
B)   backward vertical integration; forward vertical integration
C)   related diversification; unrelated diversification
D)   unrelated diversification; related diversificationE) A) and B)
F) A) and D)

Question 5

In spite of the challenges associated with it, a number of firms continue to use the unrelated diversification strategy, especially in Europe and in emerging markets.

Accepted Answer

A) True 
 B)False

Question 6

Describe how diversified firms can use activity sharing and transfer of core competencies to create value.

Accepted Answer

In related diversification, a firm seeks...

Question 7

Related linked firms share more resources and assets between their businesses than do related constrained firms.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Many manufacturing firms are de-integrating and moving to independent supplier networks.

Accepted Answer

A) True 
 B)False

Question 10

Synergy exists when the value created by business units working together exceeds the value that those same units create working independently.

Accepted Answer

A) True 
 B)False

Question 11

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.

Accepted Answer

A)   multiple
B)   multiportal
C)   multipoint
D)   multiplicitE) A) and B)
F) A) and C)

Question 12

Firms that have selected a related diversification corporate-level strategy seek to exploit

Accepted Answer

A)   control shared among business-unit managers.
B)   economies of scope between business units.
C)   the favorable demand of buyers.
D)   market power.E) A) and D)
F) A) and B)

Question 13

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 which outweigh cost savings generated.
D)   the firm is seeking to create value through financial economies.E) A) and B)
F) A) and C)

Question 14

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

Accepted Answer

High corporate performance eliminates th...

Question 15

Operational relatedness is created by ___________of___________.

Accepted Answer

A)   sharing; core competencies
B)   sharing; activities
C)   transferring; core competencies
D)   transferring; activitiesE) B) and D)
F) All of the above

Question 16

Free cash flows are

Accepted Answer

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 distributed as dividends to shareholders.
C)   the profits resulting after a restructured firm has been sold.
D)   dividends that have been distributed to shareholders that are taxed as capital gains.E) None of the above
F) A) and D)

Question 17

Synergy exists when

Accepted Answer

A)   cost savings are realized through improved allocations of financial resources based on investments inside or outside the firm.
B)   two units create value by utilizing market power in their respective industries.
C)   firms utilize constrained related diversification to build an attractive portfolio of businesses.
D)   the value created by business units working together exceeds the value the units create when working independently.E) C) and D)
F) All of the above

Question 18

The more "constrained" the relatedness of diversification,

Accepted Answer

A)   the fewer the linkages between the businesses within the portfolio owned by the firm.
B)   the wider the variation in the portfolio of businesses owned by the firm.
C)   the more links there are among the businesses owned by an organization.
D)   the lower the proportion of total organizational revenue derived from the dominant-business.E) C) and D)
F) All of the above

Question 19

Case Scenario 1: Syco.
Syco is a diversified company that has six primary lines of business. Fifty percent of its revenues and 18 percent of its profits come from retailing. Most of its retail outlets are discount department stores that serve as anchor tenants for large suburban shopping malls. The remaining businesses are broken out as follows: Insurance accounts for 30 percent of revenues and 50 percent of profits; consumer credit card operations are 6 percent of sales and 17 percent of profits; 5 percent of revenues and 6 percent of profits come from its stock brokerage business; commercial and residential real estate operations generate 4 percent of sales and 8 percent of profits; finally, 5 percent of revenues and 1 percent of profits come from its online portal business. The company's management states that all these businesses are essential to its competitive future.
-(Refer to Case Scenario 1)  What diversification strategy best describes Syco? Assume that retailing, insurance, consumer credit card, stock brokerages, and online portal businesses allow for some transfer of knowledge about consumer behavior including buying and bill-paying habits.

Accepted Answer

A)   related constrained diversification strategy
B)   related linked diversification strategy
C)   unrelated diversification strategy
D)   combination diversification strategyE) B) and C)
F) B) and D)

Question 20

Corporate-level strategies are strategies a firm uses to diversify its operations from a single business competing in a single market into several product markets and, most commonly, into several businesses.

Accepted Answer

A) True 
 B)False

Exam 6: Corporate-Level Strategy

Operational relatedness is created by _of_.

Correct Answer
verified

Synergy exists when the value created by business units working together exceeds the value that those same units create working independently.

Correct Answer
verified

Synergy exists when

Correct Answer
verified

Corporate-level strategies are strategies a firm uses to diversify its operations from a single business competing in a single market into several product markets and, most commonly, into several businesses.

Correct Answer
verified

As noted in the Chapter 6 Opening Case, GE is now a major player in the "clean energy" industry such as wind turbines and solar power. A major reason GE moved in this direction was_____________________________.

Correct Answer
verified

Free cash flows are

Correct Answer
verified

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

Correct Answer
verified

When a firm simultaneously practices operational relatedness and corporate relatedness,

Correct Answer
verified

Correct Answer
verified

Related linked firms share more resources and assets between their businesses than do related constrained firms.

Correct Answer
verified

Many manufacturing firms are de-integrating and moving to independent supplier networks.

Correct Answer
verified

Describe how diversified firms can use activity sharing and transfer of core competencies to create value.

Correct Answer
verified
In related diversification, a firm seeks...
View Answer

Firms that have selected a related diversification corporate-level strategy seek to exploit

Correct Answer
verified

The value of the assets of a firm using a diversification strategy to create both operational and corporate relatedness tend to be

Correct Answer
verified

In spite of the challenges associated with it, a number of firms continue to use the unrelated diversification strategy, especially in Europe and in emerging markets.

Correct Answer
verified

Research suggests that _____has decreased while _has increased possibly due to the restructuring that took place in the 1990s and early twenty-first century.

Correct Answer
verified

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

Correct Answer
verified
High corporate performance eliminates th...
View Answer

The more "constrained" the relatedness of diversification,

Correct Answer
verified

Which of the following is TRUE?

Correct Answer
verified

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.

Correct Answer
verified

Exam 6: Corporate-Level Strategy

Operational relatedness is created by ___________of___________.

Correct AnswerverifiedShow Answer

Synergy exists when the value created by business units working together exceeds the value that those same units create working independently.

Correct AnswerverifiedShow Answer

Synergy exists when

Correct AnswerverifiedShow Answer

Corporate-level strategies are strategies a firm uses to diversify its operations from a single business competing in a single market into several product markets and, most commonly, into several businesses.

Correct AnswerverifiedShow Answer

As noted in the Chapter 6 Opening Case, GE is now a major player in the "clean energy" industry such as wind turbines and solar power. A major reason GE moved in this direction was_____________________________.

Correct AnswerverifiedShow Answer

Free cash flows are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a firm simultaneously practices operational relatedness and corporate relatedness,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Related linked firms share more resources and assets between their businesses than do related constrained firms.

Correct AnswerverifiedShow Answer

Many manufacturing firms are de-integrating and moving to independent supplier networks.

Correct AnswerverifiedShow Answer

Describe how diversified firms can use activity sharing and transfer of core competencies to create value.

Correct AnswerverifiedIn related diversification, a firm seeks...View AnswerShow Answer

Firms that have selected a related diversification corporate-level strategy seek to exploit

Correct AnswerverifiedShow Answer

The value of the assets of a firm using a diversification strategy to create both operational and corporate relatedness tend to be

Correct AnswerverifiedShow Answer

In spite of the challenges associated with it, a number of firms continue to use the unrelated diversification strategy, especially in Europe and in emerging markets.

Correct AnswerverifiedShow Answer

Research suggests that _______________has decreased while ___________has increased possibly due to the restructuring that took place in the 1990s and early twenty-first century.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedHigh corporate performance eliminates th...View AnswerShow Answer

The more "constrained" the relatedness of diversification,

Correct AnswerverifiedShow Answer

Which of the following is TRUE?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Operational relatedness is created by _of_.

Correct Answer
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Correct Answer
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In related diversification, a firm seeks...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Research suggests that _____has decreased while _has increased possibly due to the restructuring that took place in the 1990s and early twenty-first century.

Correct Answer
verified

Correct Answer
verified
High corporate performance eliminates th...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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