Question 1

A firm that diversifies by exploiting its resources and capability advantages in its original business will have ________ costs than (as) firms that begin a new business without these resource and capability advantages, or ________ revenues than (as) firms lacking these advantages.
A) higher; lower
B) the same; higher
C) lower; the same
D) lower; higher

Accepted Answer

Diversifying by exploiting existing resources and capabilities often results in lower costs because the firm can leverage its existing infrastructure and expertise. Additionally, this type of diversification can lead to higher revenues because the firm is able to use its existing advantage to create a competitive edge in the new market.

Question 2

When a firm operates in multiple geographic markets simultaneously it is said to be implementing a(n)
A) international diversification strategy.
B) product-differentiation strategy.
C) geographic market diversification strategy.
D) geographic market differentiation strategy.

Accepted Answer

When a firm operates in multiple geographic markets simultaneously, it is implementing a geographic market diversification strategy. This means that the firm is expanding its business across different regions or countries in order to reduce its dependence on any one particular market and to spread its risks across multiple markets. International diversification involves expanding into new countries but may not necessarily involve operating in multiple markets simultaneously. Product-differentiation and geographic market differentiation strategies both focus on differentiating the firm's products and services from those of its competitors, rather than expanding into new markets.

Question 3

Firms pursuing ________ have between 70% and 95% of their sales in a single product market.
A) dominant-business diversification
B) single-business diversification
C) related-constrained diversification
D) related-linked diversification

Accepted Answer

Dominant-business diversification refers to firms that derive a significant portion of their revenue (between 70% and 95%) from a single product market, while still having some diversification in other areas.

Question 4

Currently, most scholars believe that exploiting economies of scope through corporate diversification, on average,
A) destroyed about 25% of a firm's market value.
B) had no impact on a firm's market value.
C) destroyed about 55% of a firm's market value.
D) increased a firm's market value.

Accepted Answer

Exploiting economies of scope through corporate diversification, on average, increased a firm's market value.

Question 5

Shared activities are quite common between both ________ and ________ diversified firms.
A) single-business; dominant-business
B) related-constrained; single-business
C) related-linked; dominant-business
D) related-constrained; related-linked

Accepted Answer

Shared activities refer to the utilization of common resources and capabilities across different businesses within a diversified firm. Related-constrained and related-linked are two types of diversification, where related-constrained firms operate within a specific industry while related-linked firms operate in related industries. Both of these types of firms, therefore, are likely to share activities across their businesses. Dominant-business firms refer to those that have one core business that generates most of their revenue, while single-business firms focus on one core business exclusively. Therefore, neither of these types of firms is likely to have shared activities across their businesses.

Question 6

If a diversified firm had three businesses and these companies shared a common marketing and service operation, as well as common technology and development, this would be an example of which type of economy of scope?
A) core competencies
B) shared activities
C) risk reduction
D) multipoint competition

Accepted Answer

The scenario described is an example of shared activities economy of scope, where the businesses share common marketing, service, technology, and development operations to reduce costs and increase efficiency. Core competencies refer to unique capabilities that give a firm a competitive advantage, risk reduction refers to spreading risk across multiple businesses, and multipoint competition refers to competing with the same rival in multiple markets.

Question 7

Firms such as PepsiCo that operate a number of businesses around the world that share a number of inputs, production technologies, or distribution channels but none of whose businesses account for more than 70% of a firm's revenues are said to be implementing a
A) related-constrained diversification.
B) related-linked diversification.
C) dominant-business diversification.
D) single-business diversification.

Accepted Answer

PepsiCo operates a number of businesses around the world that share a number of inputs, production technologies, or distribution channels but none of whose businesses account for more than 70% of a firm's revenues. This is an example of related-constrained diversification.

Question 8

Limits of activity sharing include
A) substantial organizational issues that are often associated with a diversified firm's learning how to manage cross-business relationships and in which failure can lead to excess bureaucracy, inefficiency, and organizational gridlock.
B) a significant reduction in an organization's innovation and flexibility.
C) substantial organizational issues related to adequately compensating personnel across businesses and setting transfer prices.
D) a significant reduction in an organization's ability to meet the needs of any of its customers.

Accepted Answer

Activity sharing can lead to substantial organizational issues, such as managing cross-business relationships, which can result in bureaucracy, inefficiency, and gridlock if not handled properly.

Question 9

Firms such as Disney that own and operate businesses that share a limited number of inputs, production technologies or distribution channels are said to be pursuing a ________ corporate diversification strategy.
A) related-constrained
B) related-linked
C) dominant-business
D) single-business

Accepted Answer

The answer of Firms such as Disney that own and...

Question 10

The analysis of firms pursuing a strategy of ________ is logically equivalent to the analysis of business-level strategies.
A) unrelated diversification
B) related-linked diversification
C) related-constrained diversification
D) limited corporate diversification

Accepted Answer

Limited corporate diversification involves a firm expanding into new businesses that are related to its existing businesses, but only to a limited extent. This is similar to business-level strategies, which involve a firm pursuing a competitive advantage within a specific industry or market segment. Therefore, the analysis of firms pursuing a strategy of limited corporate diversification is logically equivalent to the analysis of business-level strategies. Options A, B, and C involve more extensive forms of diversification which go beyond the scope of business-level strategies.

Question 11

A firm has implemented a strategy of ________ when all or most of its activities fall within a single industry and geographic market.
A) limited corporate diversification
B) related diversification
C) unrelated diversification
D) related-linked diversification

Accepted Answer

Limited corporate diversification refers to a strategy in which a firm operates within a single industry and geographic market. This means that all or most of the firm's activities are focused on one specific area or market. This strategy is often used by small or niche companies that can thrive by specializing in a specific product or service. It allows them to focus on their core competencies and provide the best value to their customers.

Question 12

When a firm operates in multiple industries simultaneously, it is said to be implementing a
A) product diversification strategy.
B) product-differentiation strategy.
C) geographic market diversification strategy.
D) geographic market differentiation strategy.

Accepted Answer

When a firm operates in multiple industries simultaneously, it is implementing a product diversification strategy. This type of strategy involves expanding the firm's product portfolio by adding new products that may appeal to different customer segments or serve different purposes.

Question 13

In order for corporate diversification to be economically valuable
A) there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be more costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
B) there must not be any valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
C) there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
D) there must not be any valuable economy of scope among the multiple businesses in which a firm is operating and it must be more costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.

Accepted Answer

For corporate diversification to be economically valuable, there must be some valuable economy of scope among the multiple businesses in which a firm is operating. This means that the firm can benefit from sharing resources and capabilities across different businesses. However, in order for the diversification to create value, it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.

Question 14

Firms such as General Electric that generate less than 70% of their revenues from a single product market and whose businesses share few, if any, common attributes are said to be pursuing ________ corporate diversification.
A) limited
B) related-linked
C) related-constrained
D) unrelated

Accepted Answer

This describes the definition of unrelated diversification, where firms operate in multiple business segments that have little to no overlap in terms of products or markets.

Question 15

In which type of limited corporate diversification do firms have greater than 95% of their total sales in a single product market?
A) dominant-business firms
B) single-business firms
C) related-constrained firms
D) related-linked firms

Accepted Answer

Single-business firms have greater than 95% of their total sales in a single product market. Dominant-business firms have between 70-95% of their total sales in a single product market, while related-constrained and related-linked firms have less than 70% of their sales in a single product market.

Question 16

When the value of the products or services a firm sells increases as a function of the number of business that the firm operates in, ________ are said to exist.
A) economies of scope
B) vertical economies
C) economies of scale
D) diseconomies of scope

Accepted Answer

Economies of scope refer to the cost advantages that a firm can achieve by operating in multiple businesses or markets, allowing it to share resources and leverage its expertise across product lines. As a result, the value of the products or services offered by the firm can increase as it expands its scope of operations. Vertical economies (B) refer to cost advantages that come from controlling different stages of the supply chain, while economies of scale (C) refer to cost advantages that come from producing larger volumes of output. Diseconomies of scope (D) occur when expanding into new markets or product lines increases costs rather than reducing them.

Question 17

Which of the following statements regarding economies of scope is accurate?
A) Only firms pursuing single-business diversification can exploit economies of scope.
B) Only firms pursuing related-constrained diversification can exploit economies of scope.
C) Only firms not pursuing diversification can exploit economies of scope.
D) Only diversified firms can exploit economies of scope.

Accepted Answer

Economies of scope refer to cost savings and/or revenue enhancements that a firm can achieve through diversified operations. Thus, only diversified firms can exploit economies of scope.

Question 18

When a firm simultaneously implements both a product diversification strategy and a geographic market diversification strategy it is said to be implementing a(n)
A) mixed-market diversification strategy.
B) unrelated-diversification strategy.
C) product-differentiation strategy.
D) product-market diversification strategy.

Accepted Answer

When a firm simultaneously implements both a product diversification strategy and a geographic market diversification strategy, it is said to be implementing a product-market diversification strategy. This strategy involves expanding both the range of products offered and the geographic markets served. It allows a firm to spread its risk across multiple products and markets, and to capitalize on opportunities in different locations.

Question 19

Which type of economies of scope includes shared activities and core competencies?
A) operational economies of scope
B) financial economies of scope
C) anticompetitive economies of scope
D) employee and stakeholder incentives for diversification

Accepted Answer

Operational economies of scope refer to the cost savings that a company can achieve by sharing activities and core competencies across different products or business units. This type of economies of scope is the only one among the given options that includes the concept of shared activities and core competencies. Financial economies of scope, on the other hand, refer to the benefits that arise from the pooling of financial resources, such as reduced cost of capital. Anticompetitive economies of scope refer to the advantages that a dominant firm may have over smaller competitors due to its ability to leverage its market power across multiple products or markets. Employee and stakeholder incentives for diversification are strategies to encourage diversification but not an economic concept.

Question 20

________ are complex sets of resources and capabilities that link different businesses in a diversified firm through managerial and technical know-how, experience and wisdom.
A) Managerial competencies
B) Core competencies
C) Competitive advantages
D) Core advantages

Accepted Answer

Core competencies are the unique strengths and integrated sets of resources and capabilities that allow a firm to achieve competitive advantages in its various businesses. These competencies can include managerial and technical know-how, experience, and wisdom that link different businesses in a diversified firm. Therefore, option B is the correct answer. Managerial competencies (A) and core advantages (D) are not commonly used terms, and competitive advantages (C) are the outcomes of leveraging core competencies.

Quiz 7: Corporate Diversification

A firm that diversifies by exploiting its resources and capability advantages in its original business will have costs than (as) firms that begin a new business without these resource and capability advantages, or revenues than (as) firms lacking these advantages.

When a firm operates in multiple geographic markets simultaneously it is said to be implementing a(n)

Firms pursuing ________ have between 70% and 95% of their sales in a single product market.

Currently, most scholars believe that exploiting economies of scope through corporate diversification, on average,

Shared activities are quite common between both and diversified firms.

If a diversified firm had three businesses and these companies shared a common marketing and service operation, as well as common technology and development, this would be an example of which type of economy of scope?

Firms such as PepsiCo that operate a number of businesses around the world that share a number of inputs, production technologies, or distribution channels but none of whose businesses account for more than 70% of a firm's revenues are said to be implementing a

Limits of activity sharing include

Firms such as Disney that own and operate businesses that share a limited number of inputs, production technologies or distribution channels are said to be pursuing a ________ corporate diversification strategy.

The analysis of firms pursuing a strategy of ________ is logically equivalent to the analysis of business-level strategies.

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

When a firm operates in multiple industries simultaneously, it is said to be implementing a

In order for corporate diversification to be economically valuable

Firms such as General Electric that generate less than 70% of their revenues from a single product market and whose businesses share few, if any, common attributes are said to be pursuing ________ corporate diversification.

In which type of limited corporate diversification do firms have greater than 95% of their total sales in a single product market?

When the value of the products or services a firm sells increases as a function of the number of business that the firm operates in, ________ are said to exist.

Which of the following statements regarding economies of scope is accurate?

When a firm simultaneously implements both a product diversification strategy and a geographic market diversification strategy it is said to be implementing a(n)

Which type of economies of scope includes shared activities and 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.