Question 1

Economies of scale and economies of scope are:

Accepted Answer

A) The same concepts 
B) Similar concepts, except that economies of scope relate to expansion across multiple products 
C) Similar concepts whose distinction is only really understood by economists 
D) Concepts borrowed from different disciplines 
A) The same concepts 
B) Similar concepts, except that economies of scope relate to expansion across multiple products 
C) Similar concepts whose distinction is only really understood by economists 
D) Concepts borrowed from different disciplines

Question 2

Some senior management teams have proven highly successful at running diversified firms, but the refocusing trend of the past 30 years suggests these are exceptional cases

Accepted Answer

A) True 
 B)False

Question 3

After KKR acquired RJR Nabisco in 1989, large diversified firms rushed to refocus. Why?

Accepted Answer

A) The timing of this was pure coincidence 
B) They hated Nabisco 
C) They hated KKR 
D) They feared that leveraged buyout specialists would do it to them 
A) The timing of this was pure coincidence 
B) They hated Nabisco 
C) They hated KKR 
D) They feared that leveraged buyout specialists would do it to them

Question 4

Sometimes, it can even make financial sense for a firm to enter a prima facie unattractive industry

Accepted Answer

A) True 
 B)False

Question 5

Regarding diversification, two periods stand out in the last century: 1950 to 1980, when the trend was to diversify, and 1980 to today, characterized by firms refocusing on their core businesses

Accepted Answer

A) True 
 B)False

Question 6

Is it possible to benefit from economies of scope and economies of scale simultaneously?

Accepted Answer

A) Yes, although in practice one is likely to be more important than the other in a specific firm 
B) Theoretically yes, but the organization would need to be larger than any in existence today 
C) Yes, but you have to achieve one first, then the other 
D) No. They are mutually exclusive 
A) Yes, although in practice one is likely to be more important than the other in a specific firm 
B) Theoretically yes, but the organization would need to be larger than any in existence today 
C) Yes, but you have to achieve one first, then the other 
D) No. They are mutually exclusive

Question 7

The key to the creation of value through diversification is:

Accepted Answer

A) The relative financial powers of different diversified companies 
B) The ability of the diversified company to acquire knowledge faster than market diffusion effects 
C) The ability of the diversified company to benefit from economies of scope across its businesses 
D) The ability of the diversified company to share resources and transfer capabilities more efficiently than the external market 
A) The relative financial powers of different diversified companies 
B) The ability of the diversified company to acquire knowledge faster than market diffusion effects 
C) The ability of the diversified company to benefit from economies of scope across its businesses 
D) The ability of the diversified company to share resources and transfer capabilities more efficiently than the external market

Question 8

What does the expression "conglomerate discount" mean?

Accepted Answer

A) A firm's presence in different businesses allows a decrease in its total costs 
B) Stock exchanges or bourses offered conglomerate shares at special-offer discounts 
C) The stock market tends to value diversified companies at less than their break-up value 
D) The stock market values moderately diversified companies at more than the sum of their parts 
A) A firm's presence in different businesses allows a decrease in its total costs 
B) Stock exchanges or bourses offered conglomerate shares at special-offer discounts 
C) The stock market tends to value diversified companies at less than their break-up value 
D) The stock market values moderately diversified companies at more than the sum of their parts

Question 9

Large diversified companies are very good at:

Accepted Answer

A) Reacting quickly to market downturns 
B) Downsizing and refocusing 
C) Carrying out routine processes they've had time to get right 
D) Running diversified portfolios 
A) Reacting quickly to market downturns 
B) Downsizing and refocusing 
C) Carrying out routine processes they've had time to get right 
D) Running diversified portfolios

Question 10

What are the key characteristics of "private equity firms"?

Accepted Answer

A) They raise funds to buy the entire equity in businesses, remove them from the stock market, and sell them at a later date 
B) They buy and resell businesses immediately 
C) They have very aggressive business behaviors 
D) They do not take into consideration their businesses' human resources 
A) They raise funds to buy the entire equity in businesses, remove them from the stock market, and sell them at a later date 
B) They buy and resell businesses immediately 
C) They have very aggressive business behaviors 
D) They do not take into consideration their businesses' human resources

Question 11

When trying to link performance to diversification:

Accepted Answer

A) It is not easy to distinguish association from causation in the results 
B) It is difficult to source reliable data 
C) It's difficult to distinguish between permanent and temporary phenomena 
D) Statistical tools are generally inadequate to determine the true position 
A) It is not easy to distinguish association from causation in the results 
B) It is difficult to source reliable data 
C) It's difficult to distinguish between permanent and temporary phenomena 
D) Statistical tools are generally inadequate to determine the true position

Question 12

What is the alternative to Porter's better-off test?

Accepted Answer

A) The acid test 
B) The attractiveness test 
C) The parenting value added test 
D) The diamond test 
A) The acid test 
B) The attractiveness test 
C) The parenting value added test 
D) The diamond test

Question 13

Economies of scope can also be achieved by licensing and royalties.

Accepted Answer

A) True 
 B)False

Question 14

There was a surge in "leveraged buyouts" in the 1980s. This means:

Accepted Answer

A) That buyers used legal action and other means to "leverage out" poor CEOs 
B) That acquirers bought firms, and let it be known in advance that the previous management would be "leveraged out" 
C) That the acquirer used the future value of the acquisition as security to borrow the money to buy the company 
D) All of the above 
A) That buyers used legal action and other means to "leverage out" poor CEOs 
B) That acquirers bought firms, and let it be known in advance that the previous management would be "leveraged out" 
C) That the acquirer used the future value of the acquisition as security to borrow the money to buy the company 
D) All of the above

Question 15

Are there examples of profitable unrelated diversified firms?

Accepted Answer

Examples exist where diversified firms a

Question 16

ITT, Textron, General Electric, and Allied Signal in the US, and Hanson, Slater-Walker, and BTR in the UK are:

Accepted Answer

A) Conglomerates in related businesses 
B) Conglomerates 
C) Vertically integrated firms 
D) Large and unsuccessful firms 
A) Conglomerates in related businesses 
B) Conglomerates 
C) Vertically integrated firms 
D) Large and unsuccessful firms

Question 17

A firm's business scope never changes over time

Accepted Answer

A) True 
 B)False

Question 18

The internal labor market provides a large, diverse firm with the chance to make savings, by:

Accepted Answer

A) Developing senior managers with wide experience 
B) Relying less on external recruitment consultants 
C) Having first-hand knowledge of a large pool of internal recruits for transfer between businesses 
D) All the above 
A) Developing senior managers with wide experience 
B) Relying less on external recruitment consultants 
C) Having first-hand knowledge of a large pool of internal recruits for transfer between businesses 
D) All the above

Question 19

Diversification should:

Accepted Answer

A) Be avoided 
B) Be a last resort 
C) Only be undertaken if it is genuinely expected to yield benefits 
D) All of the above 
A) Be avoided 
B) Be a last resort 
C) Only be undertaken if it is genuinely expected to yield benefits 
D) All of the above

Question 20

Canon, General Electric, Unilever, and Nestle are examples of firms:

Accepted Answer

A) That are not successful 
B) For which graduating students are intensively competing, because of their reputation for developing recruits for their diverse businesses 
C) That do not transfer their employees between divisions 
D) For which public opinion is generally negative 
A) That are not successful 
B) For which graduating students are intensively competing, because of their reputation for developing recruits for their diverse businesses 
C) That do not transfer their employees between divisions 
D) For which public opinion is generally negative

Economies of scale and economies of scope are:

Some senior management teams have proven highly successful at running diversified firms, but the refocusing trend of the past 30 years suggests these are exceptional cases

After KKR acquired RJR Nabisco in 1989, large diversified firms rushed to refocus. Why?

Sometimes, it can even make financial sense for a firm to enter a prima facie unattractive industry

Regarding diversification, two periods stand out in the last century: 1950 to 1980, when the trend was to diversify, and 1980 to today, characterized by firms refocusing on their core businesses

Is it possible to benefit from economies of scope and economies of scale simultaneously?

The key to the creation of value through diversification is:

What does the expression "conglomerate discount" mean?

Large diversified companies are very good at:

What are the key characteristics of "private equity firms"?

When trying to link performance to diversification:

What is the alternative to Porter's better-off test?

Economies of scope can also be achieved by licensing and royalties.

There was a surge in "leveraged buyouts" in the 1980s. This means:

Are there examples of profitable unrelated diversified firms?

ITT, Textron, General Electric, and Allied Signal in the US, and Hanson, Slater-Walker, and BTR in the UK are:

A firm's business scope never changes over time

The internal labor market provides a large, diverse firm with the chance to make savings, by:

Diversification should:

Canon, General Electric, Unilever, and Nestle are examples of firms:

The Concept of Strategy

Goals, Values and Performance

Industry Analysis: the Fundamentals

Further Topics in Industry and Competitive Analysis

Analyzing Resources and Capabilities

Developing Resources and Capabilities

Organization Structure and Management Systems: the Fundamentals of Strategy Implementation

The Nature and Sources of Competitive Advantage

Cost Advantage

Differentiation Advantage

Industry Evolution and Strategic Change

Technology-Based Industries and the Management of Innovation

Competitive Advantage in Mature Industries

Vertical Integration and the Scope of the Firm

Global Strategies and the Multinational Corporation

Implementing Corporate Strategy: Management of the Multibusiness Firm

Current Trends in Strategic Management

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Exam 16: Diversification Strategy

Economies of scale and economies of scope are:

Some senior management teams have proven highly successful at running diversified firms, but the refocusing trend of the past 30 years suggests these are exceptional cases

After KKR acquired RJR Nabisco in 1989, large diversified firms rushed to refocus. Why?

Sometimes, it can even make financial sense for a firm to enter a prima facie unattractive industry

Regarding diversification, two periods stand out in the last century: 1950 to 1980, when the trend was to diversify, and 1980 to today, characterized by firms refocusing on their core businesses

Is it possible to benefit from economies of scope and economies of scale simultaneously?

The key to the creation of value through diversification is:

What does the expression "conglomerate discount" mean?

Large diversified companies are very good at:

What are the key characteristics of "private equity firms"?

When trying to link performance to diversification:

What is the alternative to Porter's better-off test?

Economies of scope can also be achieved by licensing and royalties.

There was a surge in "leveraged buyouts" in the 1980s. This means:

Are there examples of profitable unrelated diversified firms?

ITT, Textron, General Electric, and Allied Signal in the US, and Hanson, Slater-Walker, and BTR in the UK are:

A firm's business scope never changes over time

The internal labor market provides a large, diverse firm with the chance to make savings, by:

Diversification should:

Canon, General Electric, Unilever, and Nestle are examples of firms:

The Concept of Strategy

Goals, Values and Performance

Industry Analysis: the Fundamentals

Further Topics in Industry and Competitive Analysis

Analyzing Resources and Capabilities

Developing Resources and Capabilities

Organization Structure and Management Systems: the Fundamentals of Strategy Implementation

The Nature and Sources of Competitive Advantage

Cost Advantage

Differentiation Advantage

Industry Evolution and Strategic Change

Technology-Based Industries and the Management of Innovation

Competitive Advantage in Mature Industries

Vertical Integration and the Scope of the Firm

Global Strategies and the Multinational Corporation

Implementing Corporate Strategy: Management of the Multibusiness Firm

Current Trends in Strategic Management

Filters