Question 1

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 refer to the cost advantages a company can achieve by producing more than one product or service using shared resources or capabilities. This allows the company to spread its fixed costs over a larger number of products, resulting in lower per-unit costs.

Question 2

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

False

Question 3

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 is designed to create value by seeking synergies and improving competitive advantage across all businesses, resulting in aggregate returns that exceed what those returns would be without the strategy. This contributes to the firm's strategic competitiveness and ability to earn above-average returns.

Question 4

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 5

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 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 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 8

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

P&G is able to share activities between its paper towel and baby diaper business, such as sourcing and optimizing the use of paper products. This creates value through cost savings and efficiency in operations.

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 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 mergers and acquisitions, including its acquisition of companies such as RCA and NBC.

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

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

UPS's corporate level strategy is related diversification, as all of its business segments are related to its core competency of package delivery and logistics.

Question 13

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

Related linked firms have a looser connection between their businesses and focus more on knowledge and competencies transfer between them, while related constrained firms share more resources and assets between their businesses.

Question 14

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 15

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 ultimate goal of corporate-level strategy is to increase the overall value of the corporation. If the businesses in the corporate portfolio are not generating more value under the corporation's management than they would under some other ownership, then the corporate-level strategy has failed.

Question 16

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

Accepted Answer

Antitrust regulations and tax laws are external factors that do not reflect the firm's values. Low performance may prompt a firm to seek diversification as a strategic move without any values attached. Therefore, these reasons are value-neutral.

Question 17

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 18

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

The answer of Successful product diversification is expected to increase...

Question 19

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