Exam 6: Corporate-Level Strategy

As indicated in the Strategic Focus, Johnson & Johnson is an example of a firm that has created value through both operational (sharing activities) and corporate (transferring core competencies) relatedness.

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

For Campbell Soup, Procter & Gamble, and Merck & Company, the businesses are related and the links between the businesses are direct. This is an example of a related linked diversification strategy.

Firms use corporate-level diversification strategies for all the following reasons EXCEPT

An office management firm has developed a system for efficiently organizing small medical and dental practices both through proprietary software and through unique training programs for staff. It has recently acquired a firm specializing in providing management services for veterinary practices. The office management firm is hoping to

To overcome the conglomerate discount, many conglomerates have sought to establish ____________ for the parent company.

An ability to efficiently allocate capital through an internal market may help the firm protect the competitive advantages it develops

Decisions to expand a firm's portfolio of businesses to reduce managerial risk can have a positive effect on the firm's value.

Because of the tax laws of the 1960s and 1970s, when dividends were taxed more heavily than capital gains, shareholders preferred that corporations

Oracle has been diversifying in the software industry through acquisition of firms such as PeopleSoft as described in the Strategic Focus. There are very close linkages between Oracle and the various units and for the strategy to work, Oracle must develop mechanisms to share activities. Oracle is clearly following a related linked diversification strategy.

An unrelated diversification strategy can create value through two types of financial economies: (1) efficient internal capital allocations, and (2) purchasing other firms, restructuring their assets, and selling them.

Different incentives to diversify sometimes exist, and the quality of a firm's resources may permit only diversification that is value neutral rather than value creating.

A company that tries to balance both operational and corporate relatedness and fails risks incurring diseconomies of scope.

Compared with diversification based on intangible resources, diversification based on financial resources is

Vertical integration exists when a company produces its own inputs (forward integration) or owns its own source of output distribution (backward integration).

Since the 1950s, U.S. government policy regarding antitrust concerns has remained constant.

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

What is the effect of a firm's low performance on the pursuit of diversification?

Related linked firms share more resources and assets between their businesses than do related constrained firms.

Xanadu, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same industry in Ireland. It plans to transfer one of its key managers from its plant in St. Louis to Ireland. What is the major threat to Xanadu's plan to transfer competencies from itself to the Irish firm?