Exam 6: Corporate-Level Strategy

Which of the following firms would be the most likely to be a successful candidate for acquisition and restructuring?

Firms seek to create value from economies of scope through all of the following EXCEPT

Firms are increasingly moving away from ____ integration and toward ____ integration.

The curvilinear relationship of corporate performance and diversification indicates that

Market power exists when a firm is able to sell its products above the existing competitive level or decrease the costs of its primary and support activities below the competitive level, or both.

What are the managerial motives to diversify?

Managerial motives to seek diversification include a desire to

Compared with related constrained firms, related linked firms share fewer resources and assets between their businesses, concentrating instead on transferring knowledge and core competencies between the businesses.

Which of the following reasons for diversification is most likely to increase the firm's value?

In a diversified firm, capital allocation can be adjusted according to more specific criteria than is possible with external market allocation of capital.

When a firm simultaneously practices operational relatedness and corporate relatedness,

The value of the assets of a firm using a diversification strategy to create both operational and corporate relatedness tend to be

Which of the following is NOT a governance mechanism that may limit managerial tendencies to over-diversify?

Certain regulatory changes (such as antitrust regulation and tax laws) create incentives or disincentives for diversification that _________________.

Describe the primary reasons a firm pursues increased diversification.

Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare and only two brick plants in the U.S. make this type of brick. -Specialty Steel owns one of these brick plants and buys all of its production. The other brick manufacturer has recently developed an inexpensive new technology whereby ordinary clay can be used to make this fire brick. This significantly reduces the production cost of this type of brick.

A significant benefit of an internal capital market is that corporate headquarters has access to detailed and accurate information regarding the performance of the company's portfolio and can thus make better capital allocation decisions.

Free cash flows are

All of Krispy Kreme's revenues come from its one main product, doughnuts. It can be considered a classic example of a firm following a related constrained strategy.

Economies of scope are cost savings resulting from a firm successfully leveraging, either through sharing or transferring, some of its capabilities and competencies developed in one business to another business.