Question 1

The lowest level of diversification is the ____ level.
A) single business
B) dominant business
C) related constrained
D) unrelated

Accepted Answer

The lowest level of diversification is the single business level, which refers to the situation in which a firm derives more than 95% of its revenue from a single business activity. This means that the company is heavily reliant on this one business and is not diversified in its operations.

Question 2

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
C) whether the portfolio of businesses should generate immediate above-average returns or should be troubled businesses which will create above-average returns only after restructuring
D) whether to integrate backward or forward.

Accepted Answer

Corporate-level strategy involves deciding which product markets and businesses the firm should participate in, and how to manage these businesses. A, C, and D are all more specific functional-level decisions within corporate-level strategy.

Question 3

The Publicis Groupe (Chapter 6 Strategic Focus) has three major groups of business (advertising, media, and digital) which share resources and capabilities. Publicis Groupe is using a _____________ diversification strategy.
A) related linked
B) related constrained
C) unrelated
D) dominant

Accepted Answer

Publicis Groupe is using a related constrained diversification strategy because their three major business groups (advertising, media, and digital) share resources and capabilities, and are all related to the field of marketing and communications.

Question 4

Which acquisition would be considered the LEAST related?
A) a candy manufacturer purchases a chemical laboratory specializing in food flavorings
B) a chain of garden centers acquires a landscape architecture firm
C) a hospital acquires a long-term care nursing home
D) an upscale "white-tablecloth" restaurant chain acquires a travel agency

Accepted Answer

Out of all the options given, an upscale "white-tablecloth" restaurant chain acquiring a travel agency seems to be the least related acquisition. The two businesses operate in completely different industries and do not complement each other in any way.

Question 5

Knowing that their firms could be acquired if they are not managed successfully encourages executives to use value-creating diversification strategies.

Accepted Answer

The fear of acquisition can incentivize executives to implement value-creating diversification strategies to improve the performance of their firms and make them less vulnerable to acquisition.

Question 6

The use of poison pills increases the chance that a poorly performing firm will be taken over.

Accepted Answer

Poison pills are anti-takeover defenses used by companies to make their shares less attractive to potential acquirers. They make it more difficult or costly for a takeover to occur. Therefore, the use of poison pills decreases the chance that a poorly performing firm will be taken over.

Question 7

Golden parachutes protect managers from the negative consequences of over-diversifying a firm.

Accepted Answer

The answer of Golden parachutes protect managers from the negative...

Question 8

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 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.

Accepted Answer

The answer of The more "constrained" the relatedness of diversification,
A)...

Question 9

GE (Chapter 6 Opening Case) was diversified and manages businesses that have only a few links between them. This corporate-level strategy is best described as ________diversification.
A) related constrained
B) related linked
C) unrelated
D) conglomerate

Accepted Answer

The answer of GE (Chapter 6 Opening Case) was diversified...

Question 10

A firm that earns less than 70% 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
D) dominant business

Accepted Answer

The answer of A firm that earns less than 70%...

Question 11

Without strict governance mechanisms, the majority of executives will act in their own self-interest rather than acting as positive stewards of firm resources.

Accepted Answer

The answer of Without strict governance mechanisms, the majority of...

Question 12

GE (Chapter 6 Opening Case) is unusual in that it __________________ _______________.
A) is widely diversified but competes only in manufacturing industries.
B) has had an unblemished environmental record.
C) is one of the few large diversified large firms that have been successful over time.
D) restricted its investments to only developed economies.

Accepted Answer

The opening case of Chapter 6 states that GE is unusual in that it is one of the few large diversified large firms that have been successful over time.

Question 13

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_____________________________.
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.

Accepted Answer

As noted in the Chapter 6 Opening Case, GE had a poor record in environmental issues, particularly in relation to PCB contamination. Moving into the "clean energy" industry was seen as a way for the company to overcome and correct this record, while also taking advantage of a growing market for renewable energy sources.

Question 14

Revenues for United Parcel Service (UPS) come 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. Which best describes the corporate level strategy of UPS?
A) Single business
B) Dominant business
C) Related constrained
D) Related linked

Accepted Answer

UPS's corporate level strategy is best described as a dominant business strategy because a significant portion of its revenues (60%) comes from U.S. package delivery operations, indicating a focus on a primary business segment while still having substantial operations in other segments.

Question 15

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

Accepted Answer

The answer of The more sharing of resources and activities...

Question 16

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

Accepted Answer

The answer of Usually a company is classified as a...

Question 17

Wm. Wrigley Jr. Company once made only chewing gum. When Wrigley bought Life Savers (a line of candy mints) and Altoids (a line of breadth mints) from Kraft, chewing gum then constituted less than 95 percent of revenues. Thus, Wrigley
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.
C) became a conglomerate since Life Savers and Altoids are unrelated businesses.
D) probably planned to restructure these companies and sell them off.

Accepted Answer

Wrigley was moving away from its traditional single-business strategy (focused on chewing gum) toward a dominant strategy by acquiring related products (Life Savers and Altoids) that complement its existing business.

Question 18

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 are worth more under the management of the company in question than they would be under any other ownership.
D) businesses in the portfolio increase the firm's financial returns.

Accepted Answer

The ultimate test of the value of a corporate-level strategy is whether the businesses in the portfolio are worth more under the management of the company in question than they would be under any other ownership. This means that the corporate-level strategy should add value to the businesses in the portfolio and help them perform better than if they were owned by another company. This is a key measure of the success of a corporate-level strategy because it shows that the corporation is able to create value across its businesses and achieve a competitive advantage in the marketplace. Therefore, option C is the best choice.

Question 19

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

Accepted Answer

The main difference between related constrained and related linked diversification is the level of resources and activities shared among the businesses. Related constrained diversification involves businesses that share similar resources and activities, while related linked diversification involves businesses that share only a few resources and activities. The percentage of total organizational profitability that comes from the dominant business, whether the diversification is vertical or horizontal, and whether the diversification is value-creating or value-neutral are not defining characteristics of these types of diversification.

Question 20

The Publicis Groupe (Chapter 6 Strategic Focus) 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.
A) related constrained
B) related linked
C) unrelated
D) dominant

Accepted Answer

The sharing of digital technology between the digital business and advertising group of Publicis Groupe implies a related constrained diversification strategy. This strategy involves expanding into related products or markets that share similarities and synergies with the existing business. In this case, the digital technology enhances the advertising products, which are already in the portfolio. This allows for leveraging existing capabilities and resources and reducing risks associated with venturing into new and unrelated areas.

Quiz 6: Corporate-Level Strategy

The lowest level of diversification is the ____ level.

Corporate-level strategy is concerned with ____ and how to manage these businesses.

The Publicis Groupe (Chapter 6 Strategic Focus) has three major groups of business (advertising, media, and digital) which share resources and capabilities. Publicis Groupe is using a _____________ diversification strategy.

Which acquisition would be considered the LEAST related?

Knowing that their firms could be acquired if they are not managed successfully encourages executives to use value-creating diversification strategies.

The use of poison pills increases the chance that a poorly performing firm will be taken over.

Golden parachutes protect managers from the negative consequences of over-diversifying a firm.

The more "constrained" the relatedness of diversification,

GE (Chapter 6 Opening Case) was diversified and manages businesses that have only a few links between them. This corporate-level strategy is best described as ________diversification.

A firm that earns less than 70% of revenue from its dominant business and has direct connections between its businesses is engaging in ____ diversification.

Without strict governance mechanisms, the majority of executives will act in their own self-interest rather than acting as positive stewards of firm resources.

GE (Chapter 6 Opening Case) is unusual in that it ____ _.

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_____________________________.

Revenues for United Parcel Service (UPS) come 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. Which best describes the corporate level strategy of UPS?

The more sharing of resources and activities among businesses, the more ____ is the relatedness of the diversification.

Usually a company is classified as a single business firm when revenues generated by the dominant business are greater than ____ percent.

Wm. Wrigley Jr. Company once made only chewing gum. When Wrigley bought Life Savers (a line of candy mints) and Altoids (a line of breadth mints) from Kraft, chewing gum then constituted less than 95 percent of revenues. Thus, Wrigley

The ultimate test of the value of a corporate-level strategy is whether the

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

The Publicis Groupe (Chapter 6 Strategic Focus) 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.