Exam 10: Corporate-Level Strategy: Related and Unrelated Diversification

An internal new venture is the most appropriate strategic choice when:

At Burger King, multiple items such as a cheeseburger, french fries, and a drink are combined together to create a complete meal. This is an example of diversification.

Which of the following is the probable consequence of a company's inability to integrate two divergent corporate cultures after an acquisition?

Which of the following seems to be a major determinant of a new venture's success?

In which of the following industry environments are acquisitions most likely to be favored over new ventures?

If a company's core skills are highly specialized and have few applications outside the core business, then a company should pursue a related diversification strategy.

Which of the following entry strategies should be used when speed is an important consideration?

Economies of scope arise when one or more of a diversified company's business units are able to realize cost-saving or differentiation advantages because it can more effectively pool, share, and utilize resources or capabilities.

In which of the following cases are bureaucratic costs likely to be lowest?

Free cash flow refers to additional funds from a government stimulus program.

Research finds that the higher the number of business units in a company's portfolio, the easier it is for corporate managers to remain informed about the complexities of each business.

When one or more components of a company's value chain are applicable to a wide variety of industrial and commercial situations, which of the following strategies should a company pursue?

When a firm does not pay out its free cash flow to its shareholders, the shareholders bear an opportunity cost equal to their next best use of those funds.

A laundromat and a pool hall together invest in a new store, where customers can wash their clothes and play pool while waiting. This is an example of an internal new venture.

At its simplest level, a joint venture may be thought of as:

A strategy based on diversification may fail to add value because companies:

New ventures are a more attractive strategy than acquisitions when:

A company can increase the probability of success of an internal venture by constructing efficient scale manufacturing facilities ahead of demand.

Research suggests that small-scale entry into a new business is the best way for an internal venture to succeed.

One way a diversified company can increase its profitability is by acquiring inefficient or poorly managed companies and then restructuring them to improve their performance.