Question 1

If the different businesses that a single firm pursues are linked on only a couple of dimensions, or if different sets of businesses are linked along very different dimensions, that corporate diversification strategy is called related-linked diversification.

Accepted Answer

This statement accurately describes related-linked diversification.

Question 2

Operational economies of scope include shared activities and risk reduction.

Accepted Answer

False

Question 3

Shared activities can increase the revenues in diversified firms' businesses, and failure to exploit shared activities across businesses can lead to out-of-control costs.

Accepted Answer

When diversified firms share activities such as logistics, marketing, and research and development, they can benefit from economies of scope and increase their overall profitability. On the other hand, failure to exploit shared activities can lead to duplication of efforts and higher costs, negatively impacting the firm's performance.

Question 4

If all the businesses in which a firm operates share a significant number of inputs, production technologies, distribution channels, similar customers, and so forth, this corporate diversification strategy is called related-constrained diversification.

Accepted Answer

Related-constrained diversification involves businesses sharing commonalities in inputs, technologies, distribution, and customers.

Question 5

When less than 90 percent of a firm's revenues are generated in a single product market and when a firm's business share few, if any, common attributes, then that firm is pursuing a strategy of unrelated corporate diversification.

Accepted Answer

The answer of When less than 90 percent of a...

Question 6

A firm has implemented a strategy of limited corporate diversification when all or most of its business activities fall within a single industry and geographic market.

Accepted Answer

Limited corporate diversification refers to a strategy where a firm operates within a single industry and geographic market, or in closely related industries within a single geographic market. Therefore, the statement is true.

Question 7

Economies of scope exist in a firm when the value of the products or services it sells increase as a function of the number of businesses in which the firm operates.

Accepted Answer

Economies of scope refer to the cost savings and efficiency gained by a firm when it produces multiple products or services with shared resources, knowledge, and capabilities. This can result in the firm having a competitive advantage and being able to offer a greater variety to customers, leading to increased value of its products or services as it operates in more businesses.

Question 8

One of the limits of activity sharing is that sharing activities may limit the ability of a particular business to meet its specific customers' needs.

Accepted Answer

Sharing activities may not always align with the specific needs and preferences of a business's customers, potentially limiting the business's ability to meet those specific needs.

Question 9

A firm that diversifies by exploiting its resources and capability advantages in its original business will have higher costs than firms that begin new business without these revenues and capability advantages or lower revenues than firms lacking these advantages, or both.

Accepted Answer

The answer of A firm that diversifies by exploiting its...

Question 10

In order for corporate diversification to be economically viable there must either be some valuable economy of scope among the multiple businesses in which a firm is operating or it must be less costly for managers in a firm to realize these economies of scope than for an outside equity holder on his or her own.

Accepted Answer

The answer of In order for corporate diversification to be...

Question 11

Currently, most scholars believe that when a firm implements a corporate diversification strategy it destroys about 25% of its market value.

Accepted Answer

The answer of Currently, most scholars believe that when a...

Question 12

Core competencies are complex sets of resources and capabilities that link different businesses in a diversified firm through managerial and technical know-how, experience, and wisdom.

Accepted Answer

This statement accurately describes core competencies.

Question 13

A firm implements a corporate diversification strategy when it operates in multiple industries or markets simultaneously.

Accepted Answer

A corporate diversification strategy involves operating in multiple industries or markets simultaneously.

Question 14

When a firm operates in multiple industries simultaneously it is said to be implementing a geographic market diversification strategy.

Accepted Answer

Geographic market diversification refers to operating in multiple geographic locations or regions, not necessarily multiple industries.

Question 15

A dominant-business firm is pursuing a related diversification strategy and has between 70 and 95 percent of firm revenues from a single business.

Accepted Answer

The answer of A dominant-business firm is pursuing a related...

Question 16

The analysis of limited corporate diversification is logically equivalent to the analysis of business-level strategies.

Accepted Answer

Limited corporate diversification refers to a company's decision to focus on a narrow range of businesses that are related to one another, while business-level strategies refer to a company's decision to compete in a specific market or industry. Both concepts involve analyzing a company's narrow focus on a specific area for competitive advantage. Therefore, the analysis of limited corporate diversification is logically equivalent to the analysis of business-level strategies.

Question 17

Over the last decade, more and more diversified firms have been abandoning efforts at managing each business's activities independently in favor of increased activity sharing.

Accepted Answer

The answer of Over the last decade, more and more...

Question 18

When a firm operates in multiple geographic markets simultaneously it is said to be implementing a product diversification strategy.

Accepted Answer

The answer of When a firm operates in multiple geographic...

Question 19

Shared activities that can provide the basis for operational economies of scope are quite common among related-constrained and related-linked diversified firms, as well as firms following an unrelated diversification strategy.

Accepted Answer

The answer of Shared activities that can provide the basis...

Question 20

Firms that may appear to be unrelated diversified firms, but that are, in fact, related diversified firms without any shared activities are referred to as seemingly related firms.

Accepted Answer

Seemingly related diversified firms do not have any related activities or common linkages between their businesses, while related diversified firms do have such linkages. Therefore, seemingly related firms are actually unrelated.

Quiz 7: Corporate Diversification