Question 1

Hutchison Whampoa Limited (HWL) has businesses in ports and related services, telecommunications, property and hotels, retail and manufacturing, and energy and infrastructure.HWL makes no efforts to share activities or transfer core competencies among the businesses.HWL is following a strategy of __________ diversification.
A) dominant business
B) related constrained
C) related linked
D) unrelated

Accepted Answer

HWL is following a strategy of unrelated diversification because it operates in various industries without sharing activities or transferring core competencies among its businesses.

Question 2

The more links among businesses, the more __________ is the level of diversification.
A) linked
B) constrained
C) integrated
D) intense

Accepted Answer

The answer of The more links among businesses, the more...

Question 3

Which of the following acquisitions 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

The acquisition of a travel agency by an upscale restaurant chain is the least related because the two businesses operate in entirely different industries with little overlap in their core operations or customer base.

Question 4

Which of the following is a value-reducing reason for diversification?
A) Enhancing the strategic competitiveness of the entire company
B) Expanding the business portfolio in order to diversify managerial employment risk
C) Gaining market power relative to competitors
D) Conforming to antitrust regulation

Accepted Answer

Diversifying to reduce managerial employment risk can lead to decisions that prioritize management's job security over shareholder value, potentially reducing the overall value of the company.

Question 5

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 related constrained level of diversification involves a higher level of resource and activity sharing among businesses compared to the related linked level, which has fewer shared resources and activities.

Question 6

The Publicis Groupe has three major groups of business (advertising, media, and digital) that share resources and activities.The Publicis Groupe is using a(n) __________ diversification strategy.
A) related linked
B) related constrained
C) unrelated
D) dominant

Accepted Answer

Publicis Groupe is using a related constrained diversification strategy because its business units (advertising, media, and digital) share resources and activities, indicating a high level of operational relatedness.

Question 7

Procter & Gamble (P&G) has a paper towel and baby diaper business, both of which use paper products.The firm's paper production plant produces inputs for both businesses.P&G MOST likely uses the __________ diversification strategy to create __________.
A) related constrained; operational relatedness
B) related linked; corporate relatedness
C) related constrained; corporate relatedness
D) related linked; operational relatedness

Accepted Answer

P&G likely uses a related constrained diversification strategy to create operational relatedness by sharing resources like paper production across its paper towel and baby diaper businesses.

Question 8

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

Accepted Answer

The single-business level represents the lowest level of diversification, as it involves a company focusing on a single product or service line.

Question 9

A firm that earns less than 70 percent 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

Related constrained diversification occurs when a firm earns less than 70% of its revenue from its dominant business and has direct connections between its businesses, sharing resources and activities.

Question 10

Firms that have selected a related diversification corporate-level strategy seek to exploit:
A) control shared among business-unit managers.
B) economies of scope between business units.
C) the favorable demand of buyers.
D) market power.

Accepted Answer

Related diversification aims to achieve economies of scope by sharing resources, capabilities, or activities across different business units to create synergies and reduce costs.

Question 11

Firms use corporate-level diversification strategies for all the following reasons EXCEPT:
A) value-creating.
B) value-neutral.
C) value-reducing.
D) value-diversifying.

Accepted Answer

Corporate-level diversification strategies are typically aimed at creating, maintaining, or reducing value, but "value-diversifying" is not a recognized objective or reason for diversification.

Question 12

Firms seek to create value from economies of scope through all of the following EXCEPT:
A) activity sharing.
B) skill transfers.
C) transfers of corporate core competencies.
D) de-integration.

Accepted Answer

De-integration refers to the process of reducing vertical integration, which does not directly relate to creating value from economies of scope. Economies of scope are achieved by leveraging shared activities, skills, and core competencies across different business units.

Question 13

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.
A) related constrained
B) related linked
C) unrelated
D) dominant

Accepted Answer

The sharing of digital technology between the digital business and the advertising group indicates a related constrained diversification strategy, where businesses share resources and activities.

Question 14

Which of the following statements is true?
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.

Accepted Answer

Related constrained firms focus on sharing tangible resources and activities across their businesses to achieve synergies, whereas related linked firms have more flexibility and may not share as many tangible resources.

Question 15

The term "conglomerates" refers to firms using the __________ diversification strategy.
A) unrelated
B) related constrained
C) related linked
D) global

Accepted Answer

Conglomerates refer to firms that use an unrelated diversification strategy, where they expand into businesses that are not related to their existing operations.

Question 16

Which of the following reasons for diversification is MOST likely to increase the firm's value?
A) Increasing managerial compensation
B) Reducing costs through business restructuring
C) Taking advantage of changes in tax laws
D) Conforming to antitrust regulation

Accepted Answer

Reducing costs through business restructuring can lead to operational efficiencies and synergies, which can increase the firm's value.

Question 17

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 of the following 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 because a significant portion (60%) of its revenues comes from U.S. package delivery operations, indicating a focus on one primary business area while still having other segments.

Question 18

An office management firm has developed a system for efficiently organizing small medical and dental practices both through proprietary software and through unique training programs for staff.It has recently acquired a firm specializing in providing management services for veterinary practices.The office management firm is hoping to:
A) achieve economies of scope.
B) implement vertical integration.
C) achieve financial economies through an unrelated acquisition.
D) acquire specialized talent from the veterinary management company.

Accepted Answer

The office management firm is aiming to achieve economies of scope by expanding its services to include veterinary practices, leveraging its existing systems and training programs across different types of medical practices.

Question 19

Operational relatedness is created by __________ of __________.
A) sharing; core competencies
B) sharing; activities
C) transferring; core competencies
D) transferring; activities

Accepted Answer

Operational relatedness is created by sharing activities between different parts of a business, which can lead to cost savings and efficiencies.

Question 20

The basic types of operational economies through which firms seek value from economies of scope are:
A) synergies between internal and external capital markets.
B) the leveraging of individual tangible resources.
C) the sharing of value-chain activities and support functions.
D) joint ventures and outsourcing.

Accepted Answer

Economies of scope are achieved when a firm shares value-chain activities and support functions across different products or services, leading to cost savings and increased efficiency.

Quiz 6: Corporate-Level Strategy

The more links among businesses, the more __________ is the level of diversification.

Which of the following acquisitions would be considered the LEAST related?

Which of the following is a value-reducing reason for diversification?

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

The Publicis Groupe has three major groups of business (advertising, media, and digital) that share resources and activities.The Publicis Groupe is using a(n) __________ diversification strategy.

Procter & Gamble (P&G) has a paper towel and baby diaper business, both of which use paper products.The firm's paper production plant produces inputs for both businesses.P&G MOST likely uses the diversification strategy to create .

The lowest level of diversification is the __________ level.

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

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

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

Firms seek to create value from economies of scope through all of the following EXCEPT:

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.

Which of the following statements is true?

The term "conglomerates" refers to firms using the __________ diversification strategy.

Which of the following reasons for diversification is MOST likely to increase the firm's value?

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 of the following best describes the corporate-level strategy of UPS?

Operational relatedness is created by of .

The basic types of operational economies through which firms seek value from economies of scope are: