Question 1

Why are U.S. companies often the first to develop new products that are later made into commercial successes by other companies?

Accepted Answer

U.S. companies are often the first to develop new products that are later made into commercial successes by other companies for several reasons:

1. Innovation Ecosystem: The United States has a robust innovation ecosystem supported by a combination of world-class universities, a strong culture of entrepreneurship, and a legal framework that encourages innovation and protects intellectual property. This ecosystem fosters research and development (R&D) and helps in the rapid commercialization of new ideas.

2. Venture Capital: The U.S. has a mature venture capital industry that is willing to invest in high-risk startups with the potential for high rewards. This availability of capital allows entrepreneurs to take their innovative products from concept to market.

3. Large Domestic Market: The U.S. has one of the largest and most diverse consumer markets in the world, providing a significant customer base for new products. This large domestic market allows companies to achieve economies of scale and refine their products before expanding globally.

4. Risk-Taking Culture: There is a cultural acceptance of risk-taking and failure in the U.S. business environment. This encourages entrepreneurs to pursue novel ideas and learn from setbacks without the stigma that might be associated with failure in other cultures.

5. Skilled Workforce: The U.S. has a highly skilled and adaptable workforce with expertise in technology, marketing, and business strategy. This talent pool is crucial for the development and commercialization of new products.

6. Regulatory Environment: The U.S. regulatory environment can be conducive to innovation, with processes in place for the approval of new products, particularly in sectors like technology and biotechnology.

7. Global Leadership: U.S. companies often set global trends and standards due to their influence and reach. When a U.S. company introduces a successful new product, it can quickly gain international attention, prompting companies in other countries to adapt or improve upon the innovation.

However, it's important to note that while U.S. companies may be the first to develop new products, the ability to sustain commercial success is contingent on various factors, including the company's ability to scale, adapt, and compete in an increasingly globalized market. Other companies, particularly those in countries with lower production costs or different regulatory environments, may be able to iterate on the initial innovation, produce it more cheaply, and thus gain a competitive edge in the global market.

Question 2

Which of the following can explain why firms fail to realize hoped-for synergies from their diversification activities?
A) Managers have a poor understanding of how diversification activities will "fit" or be coordinated with existing businesses.
B) Managers try to complete an
C) acquisition quickly before other buyers develop an interest in the acquisition target and begin a "bidding war."
D) After making an acquisition, managers fail to integrate the new business into their firm's existing portfolio of businesses.
E) All of these
F) None of these

Accepted Answer

All of these factors can contribute to a failure to realize expected synergies from diversification activities. Poor understanding of how new businesses will fit with existing ones can lead to difficulty integrating operations and achieving cost savings. Rushing to complete an acquisition can lead to overlooking potential pitfalls and not thoroughly evaluating how the new business will fit with existing ones. Finally, failure to integrate the new business into the existing portfolio can result in missed opportunities to leverage knowledge or capabilities across the firm.

Question 3

______________ refers to using the same resource to do different things either to take better advantage of existing resources, to achieve lower unit costs, or both.
A) Economic profit benefits
B) Economies of scale
C) Economies of scope
D) Economies of synergy
E) Strategic business utilities

Accepted Answer

Economies of scope refer to using the same resource to do different things, which allows firms to achieve lower unit costs, take advantage of existing resources, or both. This is different from economies of scale, which refer to reducing unit costs by increasing scale of production or operation.

Question 4

_____________ exist when unit costs decline with increases in production, as fixed costs are spread over a larger volume of output.
A) Economic profit benefits
B) Economies of scale
C) Economies of scope
D) Economies of synergy
E) Strategic business utilities

Accepted Answer

Economies of scale refer to the situation where unit costs decrease as production increases due to spreading fixed costs over a larger volume of output.

Question 5

_______________ is the simplest route to global markets.
A) Exporting
B) Franchising
C) Joint ventures
D) Licensing
E) Strategic alliances

Accepted Answer

Exporting is the simplest route to global markets as companies can simply sell their products or services to buyers in other countries without making major investments or changes to their operations. It also allows companies to test the waters in new markets before committing to more complex strategies such as joint ventures or strategic alliances.

Question 6

Firms that engage in extensive ______________ diversification are referred to as conglomerates.
A) Backward
B) Forward
C) Horizontal
D) Unrelated
E) Vertical

Accepted Answer

Unrelated diversification refers to a firm entering into businesses that are not related to its current operations. When a firm engages in extensive unrelated diversification, it is referred to as a conglomerate.

Question 7

_______________________diversification refers to a strategy that involves adding businesses or product/services lines that are unrelated to the existing core business.
A) Backward
B) Forward
C) Horizontal
D) Unrelated
E) Vertical

Accepted Answer

Unrelated diversification involves adding businesses or product/services lines that are completely different from the existing core business. This strategy is often a way for companies to spread their risk and pursue new opportunities in different industries or markets.

Question 8

_________________ diversification refers to a strategy of adding related or similar product/service lines to the existing core business, either through acquisition of competitors or through the internal development of new products or services.
A) Backward
B) Forward
C) Horizontal
D) Unrelated
E) Vertical

Accepted Answer

Horizontal diversification refers to adding new products or services that are related or similar to the existing core business. This can be done through acquiring competitors or developing new products/services internally. Backward diversification refers to adding activities that are closer to the source of raw materials or production processes, while forward diversification refers to adding activities that are closer to customers. Unrelated diversification refers to adding product/service lines that are completely unrelated to the existing core business. Vertical diversification refers to adding activities that are at different stages of the value chain, either backward or forward.

Question 9

________________ integration refers to a strategy of moving closer to the consumer or end user by acquiring or establishing retail outlets for the distribution, sale, or after-sale service of the firm's products or services.
A) Backward
B) Forward
C) Horizontal
D) Unrelated
E) Vertical

Accepted Answer

Forward integration involves moving closer to the end user by acquiring or establishing retail outlets for the distribution, sale, or after-sale service of the firm's products or services. Backward integration involves acquiring or establishing sources of supply, while horizontal integration involves merging with or acquiring competitors in the same industry. Unrelated integration refers to diversifying into unrelated businesses. Vertical integration may refer to either forward or backward integration.

Question 10

________________ integration refers to a strategy of moving closer to the sources of raw materials by acquiring resource supplier or by manufacturing the components needed for the production of a final product.
A) Backward
B) Forward
C) Horizontal
D) Unrelated
E) Vertical

Accepted Answer

Backward integration involves acquiring or merging with suppliers to gain control over the inputs and raw materials needed for the production process. This strategy can help to reduce costs, improve quality and increase efficiency as the organization has greater control over the supply chain.

Question 11

What percentage of the variation in business unit performance is accounted for by business strategy?
A) 0.0008
B) 0.161
C) 0.22
D) 0.452
E) 0.83

Accepted Answer

The answer of What percentage of the variation in business...

Question 12

Why do firms diversify rather than stay focused on a single business?

Accepted Answer

The answer of Why do firms diversify rather than stay...

Question 13

Why must most firms rely on financial synergies when pursuing unrelated diversification?

Accepted Answer

The answer of Why must most firms rely on financial...

Question 14

Give three reasons why a firm might engage in unrelated diversification.

Accepted Answer

The answer of Give three reasons why a firm might...

Question 15

Discuss what is meant by the statement that "It's actually easier to manage diversification in unrelated markets."

Accepted Answer

The answer of Discuss what is meant by the statement...

Question 16

Discuss what is meant by the statement that "You don't drive growth from

Accepted Answer

The answer of Discuss what is meant by the statement...

Question 17

Why did the wave of consolidation that swept over the banking industry produce so few totally new products or services as a result of these combinations?

Accepted Answer

The answer of Why did the wave of consolidation that...

Question 18

Why have many firms reversed their outsourcing strategies and become more vertically integrated?

Accepted Answer

The answer of Why have many firms reversed their outsourcing...

Question 19

List four advantages of vertical integration.

Accepted Answer

The answer of List four advantages of vertical integration....

Question 20

List two reasons why managers of firms with surplus cash flows pursue diversification strategies?

Accepted Answer

The answer of List two reasons why managers of firms...

Quiz 10: Corporate Strategy and Diversification

Why are U.S. companies often the first to develop new products that are later made into commercial successes by other companies?

Which of the following can explain why firms fail to realize hoped-for synergies from their diversification activities?

______________ refers to using the same resource to do different things either to take better advantage of existing resources, to achieve lower unit costs, or both.

_____________ exist when unit costs decline with increases in production, as fixed costs are spread over a larger volume of output.

_______________ is the simplest route to global markets.

Firms that engage in extensive ______________ diversification are referred to as conglomerates.

_______________________diversification refers to a strategy that involves adding businesses or product/services lines that are unrelated to the existing core business.

_________________ diversification refers to a strategy of adding related or similar product/service lines to the existing core business, either through acquisition of competitors or through the internal development of new products or services.

________________ integration refers to a strategy of moving closer to the consumer or end user by acquiring or establishing retail outlets for the distribution, sale, or after-sale service of the firm's products or services.

________________ integration refers to a strategy of moving closer to the sources of raw materials by acquiring resource supplier or by manufacturing the components needed for the production of a final product.

What percentage of the variation in business unit performance is accounted for by business strategy?