Question 1

In general,as a source of capital a diversified firm has ________ information about a business that it owns compared to external sources of capital.
A)more and better
B)the same
C)less and inferior
D)more but biased

Accepted Answer

A diversified firm has more and better information about a business that it owns compared to external sources of capital because it has direct access to internal financial statements, management reports, and other internal documents that can provide more detailed and accurate information about the business operations and financial performance. This information advantage allows the diversified firm to make more informed investment decisions and mitigate risk better.

Question 2

Diversified firms that are exploiting core competencies as an economy of scope but are not doing so with any shared activities are sometimes called ________ diversified firms.
A)seemingly unrelated
B)unrelated
C)semi-related
D)link-related

Accepted Answer

Seemingly unrelated diversified firms are those that do not share any activities or operational synergies but still maintain a diversified portfolio by exploiting their core competencies as an economy of scope. This allows them to enter into different industries and markets, minimizing risks and maximizing profits. Examples include General Electric, Virgin Group, and Berkshire Hathaway.

Question 3

________ 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 refer to the unique strengths and resources of a company that set it apart from competitors. In a diversified firm, these core competencies can be shared among different businesses to create synergies and improve overall performance. This includes managerial and technical expertise, as well as experience and knowledge gained through operating in different industries.

Question 4

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 sharing resources and utilizing core competencies across different products or businesses within a company. This includes shared activities such as marketing, research and development, and production, as well as leveraging core competencies such as specialized skills or technology. Financial economies of scope relate to cost savings from shared financial resources, while anticompetitive economies of scope refer to leveraging market power to limit competition. Employee and stakeholder incentives for diversification are not a type of economies of scope.

Question 5

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

Related-linked diversification involves pursuing different businesses that are linked on a few dimensions, such as technology or distribution channels, but may not necessarily have a strong or direct connection.

Question 6

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 the cost-saving efficiencies achieved by a firm that operates in multiple businesses simultaneously. Therefore, only diversified firms can exploit economies of scope.

Question 7

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 can lead to lower costs in the new business. Additionally, leveraging these advantages can result in higher revenues compared to firms without them.

Question 8

Compared to two very risky businesses that have cash flows that are not highly correlated over time and that are operating separately,the risk of a diversified firm operating in those same two businesses simultaneously is
A)somewhat higher.
B)lower.
C)the same.
D)substantially higher.

Accepted Answer

A diversified firm operating in both risky businesses simultaneously would have a portfolio of various assets, thus, reducing the overall risk of the firm. This is because the cash flows of the two businesses are not highly correlated over time, and in the event that one business is performing poorly, the other could be doing well, resulting in a balancing effect on the cash flows of the firm. As a result, the risk of a diversified firm operating in two risky businesses simultaneously would be lower than if the businesses were operating separately.

Question 9

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 exist when the value of a firm's products or services increases as the firm operates in multiple businesses or markets. This can be achieved through sharing resources and expertise across different products or services, leading to cost savings and increased efficiency.

Question 10

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. Additionally, it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own. This means that the firm can benefit from synergies and cost savings by operating in multiple businesses, and that the value created is greater than what outside investors could achieve on their own. Therefore, option C is the correct answer.

Question 11

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

Shared activities.

Question 12

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 bring about substantial organizational issues in a diversified firm, as different businesses may have different practices and require different resources, making cross-business relationships difficult to manage. This can lead to excess bureaucracy, inefficiency, and organizational gridlock. Therefore, A is the best choice. While B, C, and D can also be limitations, they are less significant compared to the organizational issues described in A.

Question 13

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 use of common resources or capabilities across different businesses or units within a firm. Related-constrained and related-linked diversified firms have some degree of similarity or complementarity in their products or markets, which allows them to leverage shared activities for competitive advantage. Single-business and dominant-business firms, on the other hand, focus on a single product, market, or business unit, which limits the potential for shared activities. Therefore, the correct choice is D, which includes both types of related diversified firms that are more likely to engage in shared activities.

Question 14

A common way of thinking about strategy across different businesses within a firm is known as the firm's
A)core competency.
B)competitive advantage.
C)economy of scope.
D)dominant logic.

Accepted Answer

The common way of thinking about strategy across different businesses within a firm is known as the firm's dominant logic. It refers to the set of implicit assumptions that guide the firm's behavior and decision-making processes across different business units. It helps the firm leverage its strengths and capabilities across its different business units and create value for its customers and shareholders. While core competency, competitive advantage, and economy of scope are all important concepts in strategy, none of them fully capture the idea of a dominant logic.

Question 15

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

Economies of scope through corporate diversification are generally believed to increase a firm's market value by allowing the firm to leverage shared resources, capabilities, or technologies across multiple products or markets, thus improving efficiency and competitive advantage.

Question 16

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 17

Identify and distinguish between the five different levels of diversification discussed in Chapter 7.

Accepted Answer

The answer of Identify and distinguish between the five different...

Question 18

Discuss when a firm is implementing a corporate diversification strategy and differentiate between a product diversification strategy,a geographic market diversification strategy and a product-market diversification strategy.

Accepted Answer

The answer of Discuss when a firm is implementing a...

Question 19

If all of a firm's businesses share the same core competencies,then that firm has implemented a strategy of ________ diversification.
A)single-business
B)related-linked
C)related-constrained
D)dominant-business

Accepted Answer

Related-constrained diversification strategy involves a firm diversifying into areas that share similar core competencies, allowing for operational synergies and strategic coherence across its different businesses.

Question 20

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

This is a correct definition of related-constrained diversification where businesses share similarities in inputs, technologies, distribution, customers, etc.

Quiz 9: Corporate Diversification

In general,as a source of capital a diversified firm has ________ information about a business that it owns compared to external sources of capital.

Diversified firms that are exploiting core competencies as an economy of scope but are not doing so with any shared activities are sometimes called ________ diversified firms.

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

Which type of economies of scope includes shared activities and core competencies?

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.

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

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.

Compared to two very risky businesses that have cash flows that are not highly correlated over time and that are operating separately,the risk of a diversified firm operating in those same two businesses simultaneously is

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.

In order for corporate diversification to be economically valuable

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?

Limits of activity sharing include

Shared activities are quite common between both and diversified firms.

A common way of thinking about strategy across different businesses within a firm is known as the firm's

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

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.

Identify and distinguish between the five different levels of diversification discussed in Chapter 7.

Discuss when a firm is implementing a corporate diversification strategy and differentiate between a product diversification strategy,a geographic market diversification strategy and a product-market diversification strategy.

If all of a firm's businesses share the same core competencies,then that firm has implemented a strategy of ________ diversification.

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.

Quiz 9: Corporate Diversification

In general,as a source of capital a diversified firm has ________ information about a business that it owns compared to external sources of capital.

Diversified firms that are exploiting core competencies as an economy of scope but are not doing so with any shared activities are sometimes called ________ diversified firms.

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

Which type of economies of scope includes shared activities and core competencies?

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.

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

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.

Compared to two very risky businesses that have cash flows that are not highly correlated over time and that are operating separately,the risk of a diversified firm operating in those same two businesses simultaneously is

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.

In order for corporate diversification to be economically valuable

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?

Limits of activity sharing include

Shared activities are quite common between both ________ and ________ diversified firms.

A common way of thinking about strategy across different businesses within a firm is known as the firm's

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

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.

Identify and distinguish between the five different levels of diversification discussed in Chapter 7.

Discuss when a firm is implementing a corporate diversification strategy and differentiate between a product diversification strategy,a geographic market diversification strategy and a product-market diversification strategy.

If all of a firm's businesses share the same core competencies,then that firm has implemented a strategy of ________ diversification.

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.

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.

Shared activities are quite common between both and diversified firms.