Question 1

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

Accepted Answer

Corporate-level strategy is focused on determining which product markets and businesses a firm should be in, and how they should allocate resources across these different areas. The other options mentioned - investing in global or domestic businesses, generating immediate above-average returns or restructuring troubled businesses, and backward or forward integration - are more specific strategies that may be used to achieve the broader corporate-level goals outlined in option B.

Question 2

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

Accepted Answer

The related constrained level of diversification involves businesses sharing resources and activities, but with a dominant business that accounts for the majority of profits. The related linked level of diversification also involves shared resources and activities, but the businesses are not as closely related and there is no dominant business. Therefore, the main difference between the two is the level of resources and activities shared among the businesses.

Question 3

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

Accepted Answer

This statement is true. The threat of acquisition can motivate executives to pursue diversification strategies that create value for the company, in order to prevent the company from becoming an attractive target for acquisition. This is because if a company is effectively leveraging multiple business units and generating strong revenue streams, potential acquirers may be deterred by the complexity of the business and the premium they would have to pay to acquire it.

Question 4

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 5

The lowest level of diversification is the ____ level.

Accepted Answer

Single business is the lowest level of diversification where a company focuses on a single product or service in a single market. This level of diversification is characterized by a lack of diversification and dependence on a single product or service. Therefore, option A is the best choice. Dominant business, related constrained, and unrelated are higher levels of diversification, with increasing levels of risk and complexity.

Question 6

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.

Accepted Answer

Publicis Groupe's three major groups of business (advertising, media, and digital) are related to each other and share resources and capabilities. Therefore, Publicis Groupe is using a related constrained diversification strategy.

Question 7

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 8

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

Accepted Answer

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

Question 9

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?

Accepted Answer

UPS's corporate level strategy is dominant business because the majority of its revenues come from its U.S. package delivery operations. The company has expanded its services internationally and diversified into non-packaging operations, but its core business remains package delivery in the United States.

Question 10

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.

Accepted Answer

The Publicis Groupe's use of digital technology from its digital business to enhance the advertising products in its advertising group demonstrates a related constrained diversification strategy. This strategy involves the sharing of activities and resources between business units that are related to each other in some way, such as through technology or distribution channels. In this case, the digital business and advertising group are related in terms of their focus on marketing and communications, which allows for synergies and improved performance across the organization.

Question 11

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

Accepted Answer

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

Question 12

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.

Accepted Answer

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

Question 13

The more "constrained" the relatedness of diversification,

Accepted Answer

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

Question 14

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

Accepted Answer

The answer of Wm. Wrigley Jr. Company once made only...

Question 15

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_____________________________.

Accepted Answer

The opening case notes that GE moved into the clean energy industry in part to overcome and correct its record in environmental issues. This implies that GE saw a need to improve its environmental reputation and saw the clean energy industry as a way to do so.

Question 16

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

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 corporation's strategy should be adding value to the businesses in its portfolio by providing them with resources, capabilities, and synergies that they would not have under any other ownership. This can be measured by comparing the financial performance and market value of the businesses in the portfolio under the current ownership with what they would have been worth under alternative ownership. If the businesses are worth more under the current ownership, then the corporate-level strategy is adding value and is therefore valuable.

Question 17

GE (Chapter 6 Opening Case) is unusual in that it __________________ _______________.

Accepted Answer

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

Question 18

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

Accepted Answer

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

Question 19

Which acquisition would be considered the LEAST related?

Accepted Answer

Of all the options, an upscale restaurant chain acquiring a travel agency is the least related. While all the other options involve businesses within a related industry or with a similar customer base, an acquisition of a travel agency by a restaurant chain seems out of place and does not offer any significant synergies.

Question 20

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

Accepted Answer

The use of poison pills is actually meant to deter hostile takeovers and decrease the chance that a poorly performing firm will be taken over.

Quiz 6: Corporate Level Strategy