Question 1

Compared with related constrained firms, related linked firms share fewer resources and assets between their businesses, concentrating instead on transferring knowledge and core competencies between the businesses.

Accepted Answer

This statement is true. Related linked firms focus on transferring knowledge and core competencies between their businesses, while related constrained firms share more resources and assets between their businesses.

Question 2

Antitrust regulation, tax laws, and low performance are all value-neutral reasons why firms engage in diversification.

Accepted Answer

Antitrust regulation, tax laws, and low performance are external factors that can impact a firm's performance and profitability, and do not necessarily reflect on the values or ethics of the firm. Therefore, diversification may be a strategy used to mitigate these factors, and would be considered value-neutral.

Question 3

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

False

Question 4

Revenues for United Parcel Service (UPS) are derived from the following business segments: 60 percent from U.S. package delivery operations, 22 percent from international package delivery, and 18 percent from non-packaging operations. The best description of the corporate level strategy of UPS is unrelated diversification.

Accepted Answer

The statement is incorrect as UPS's corporate level strategy is related diversification, wherein it has expanded into various related businesses such as logistics and supply chain management.

Question 5

All of Krispy Kreme's revenues come from its one main product, doughnuts. It can be considered a classic example of a firm following a related constrained strategy.

Accepted Answer

The answer of All of Krispy Kreme's revenues come from...

Question 6

GE (discussed in the Chapter 6 Opening Case) is an example of a firm following the related constrained diversification strategy (i.e., different businesses that are highly related).

Accepted Answer

The answer of GE (discussed in the Chapter 6 Opening...

Question 7

In the Chapter 6 Opening Case, GE achieved growth and diversification through mergers and acquisitions.

Accepted Answer

The Chapter 6 Opening Case discusses how GE achieved growth and diversification through a series of mergers and acquisitions over several decades.

Question 8

A major advantage of diversification is that overall monitoring costs are reduced, since each separate business comes under the control of corporate headquarters.

Accepted Answer

The answer of A major advantage of diversification is that...

Question 9

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

The answer of Corporate-level strategies are strategies a firm uses...

Question 10

In the Chapter 6 Strategic Focus, the Publicis Groupe creates value across its three groups not by sharing resources and assets, but rather by transferring knowledge and core competencies.

Accepted Answer

The answer of In the Chapter 6 Strategic Focus, the...

Question 11

GE (discussed in the Chapter 6 Opening Case) is an example of a firm that used its corporate strategy to achieve competitive advantage by selecting and managing a group of different businesses competing in different product markets.

Accepted Answer

The answer of GE (discussed in the Chapter 6 Opening...

Question 12

In the Chapter 6 Strategic Focus, the Publicis Groupe has three major groups of businesses, each in a highly related but unique market area: advertising, media, and digital. This form of diversification strategy is known as related linked.

Accepted Answer

The answer of In the Chapter 6 Strategic Focus, the...

Question 13

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

Accepted Answer

The answer of Related linked firms share more resources and...

Question 14

An effective corporate strategy creates aggregate returns across all businesses that exceed what those returns would be without the strategy and contributes to the firm's strategic competitiveness and ability to earn above-average returns.

Accepted Answer

An effective corporate strategy should create synergies across businesses, leading to higher aggregate returns than if each business were to operate independently. This can contribute to the firm's overall strategic competitiveness and ability to earn above-average returns.

Question 15

United Technologies, Textron, Samsung, and Hutchison Whampoa Limited are examples of diversified firms that have no relationships between their businesses. These firms all use the strategy of unrelated diversification.

Accepted Answer

These firms are examples of unrelated diversification, where they have multiple businesses that are not related to each other.

Question 16

Economies of scope are cost savings resulting from a firm successfully leveraging, either through sharing or transferring, some of its capabilities and competencies developed in one business to another business.

Accepted Answer

Economies of scope occur when a firm is able to lower its costs by sharing and mobilizing its resources, capabilities, and technologies across multiple business units. This can help to increase efficiency, reduce duplication of efforts, and improve the overall effectiveness of the firm's operations. Examples of economies of scope include shared services, shared manufacturing facilities, and shared distribution channels. Therefore, the statement is true.

Question 17

A firm uses a corporate-level diversification strategy for a variety of reasons all of which have to do with ways to create value.

Accepted Answer

The answer of A firm uses a corporate-level diversification strategy...

Question 18

Decisions to expand a firm's portfolio of businesses to reduce managerial risk can have a positive effect on the firm's value.

Accepted Answer

The answer of Decisions to expand a firm's portfolio of...

Question 19

If the businesses in the corporate portfolio are not worth more under the management of the corporation than they would be under any other ownership, then the corporate-level strategy has failed.

Accepted Answer

The whole purpose of a corporate-level strategy is to create value for the portfolio of businesses under the corporation's management. If the businesses would be worth more under a different owner, then the corporate-level strategy has not been successful in creating value.

Question 20

Procter & Gamble (P&G) has a paper towel and baby diaper business that both use paper products. This is an example of value created through the sharing of activities.

Accepted Answer

By sharing the use of paper products between its paper towel and baby diaper businesses, P&G can achieve economies of scale and reduce costs, creating value for the company. This is an example of activity sharing.

Quiz 6: Corporate-Level Strategy