Question 1

Diversification premium is a situation in which:

Accepted Answer

A)  customers have to pay premium prices on products manufactured by firms pursuing unrelated diversification due to the lack of economies of scope. 
B)  the overall value creation of highly diversified firms is more than the sum of the value created by individual business units. 
C)  the stock price of related-diversification firms is valued at greater than the sum of their individual business units. 
D)  shareholders are benefitted from the market capitalization of a highly diversified firm because of its economies of scale. 
A)  customers have to pay premium prices on products manufactured by firms pursuing unrelated diversification due to the lack of economies of scope. 
B)  the overall value creation of highly diversified firms is more than the sum of the value created by individual business units. 
C)  the stock price of related-diversification firms is valued at greater than the sum of their individual business units. 
D)  shareholders are benefitted from the market capitalization of a highly diversified firm because of its economies of scale.

Question 2

What options do managers have to formulate corporate strategy once they have a clear understanding of their firm's core competencies?

Accepted Answer

Once managers have a clear understanding

Question 3

Which of the following corporate strategies did ExxonMobil pursue by acquiring XTO Energy, a natural gas company?

Accepted Answer

A)  Taper integration strategy 
B)  Differentiation strategy 
C)  Related diversification strategy 
D)  Cost-leadership strategy 
A)  Taper integration strategy 
B)  Differentiation strategy 
C)  Related diversification strategy 
D)  Cost-leadership strategy

Question 4

GFR Group is the parent company of many related businesses under its banner.Each share of the parent company is quoted at $220.However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share.In this scenario, what has GFR Group created?

Accepted Answer

A)  Capital liquidity 
B)  Diversification premium 
C)  Diversification discount 
D)  Demand-pull inflation 
A)  Capital liquidity 
B)  Diversification premium 
C)  Diversification discount 
D)  Demand-pull inflation

Question 5

How can a firm pursuing a diversification strategy enhance its overall corporate performance by leveraging financial economies?

Accepted Answer

A)  By using internal capital markets as a source of value creation 
B)  By adding more unrelated businesses into its corporate portfolio 
C)  By increasing its coordination and influence costs 
D)  By investing in businesses under the question mark quadrant of the BCG matrix 
A)  By using internal capital markets as a source of value creation 
B)  By adding more unrelated businesses into its corporate portfolio 
C)  By increasing its coordination and influence costs 
D)  By investing in businesses under the question mark quadrant of the BCG matrix

Question 6

Win Goods Inc.is a large multinational conglomerate.As a single business unit, the company's stock price is estimated to be $200.However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300.What is Win Goods experiencing in this scenario?

Accepted Answer

A)  Diversification discount 
B)  Learning-curve effects 
C)  Experience-curve effects 
D)  Economies of scale 
A)  Diversification discount 
B)  Learning-curve effects 
C)  Experience-curve effects 
D)  Economies of scale

Question 7

ElectraSync Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU).The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent.This has been attributed to the low-growth in the desktop market after the arrival of tablet computers and laptops.In the context of the Boston Consulting Group (BCG)growth-share matrix, the desktop SBU will be categorized under:

Accepted Answer

A)  stars. 
B)  question marks. 
C)  dogs. 
D)  cash cows. 
A)  stars. 
B)  question marks. 
C)  dogs. 
D)  cash cows.

Question 8

Which of the following companies will be considered as a conglomerate?

Accepted Answer

A)  ExxonMobil, after it acquired XTO Energy-a natural gas company 
B)  The Tata Group, active in industries such as tea, steel, IT, power, and automobiles 
C)  Harley-Davidson, with its Harley-Davidson branded motorcycle clothing and attire 
D)  Coca-Cola, which solely focuses on soft drinks but operates in many countries 
A)  ExxonMobil, after it acquired XTO Energy-a natural gas company 
B)  The Tata Group, active in industries such as tea, steel, IT, power, and automobiles 
C)  Harley-Davidson, with its Harley-Davidson branded motorcycle clothing and attire 
D)  Coca-Cola, which solely focuses on soft drinks but operates in many countries

Question 9

How does a conglomerate benefit from following an unrelated diversification strategy?

Accepted Answer

A)  The conglomerate can solely depend on its primary business activity for a major portion of its revenues. 
B)  The conglomerate can share most of its competencies in products, services, technology, or distribution between all its businesses. 
C)  The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies. 
D)  The conglomerate can limit the learning- and experience-curve effects it faces. 
A)  The conglomerate can solely depend on its primary business activity for a major portion of its revenues. 
B)  The conglomerate can share most of its competencies in products, services, technology, or distribution between all its businesses. 
C)  The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies. 
D)  The conglomerate can limit the learning- and experience-curve effects it faces.

Question 10

What kind of businesses is categorized under stars in the Boston Consulting Group (BCG)growth-share matrix?

Accepted Answer

A corporation's star strategic business

Question 11

When do companies experience diversification discount and diversification premium?

Accepted Answer

Firms that pursue unrelated diversificat

Question 12

The most efficient way to overcome the principal-agent problem in a firm is to:

Accepted Answer

A)  increase the level of vertical integration within the firm. 
B)  provide stock options to managers. 
C)  downsize the existing workforce. 
D)  organize economic activities within the firm. 
A)  increase the level of vertical integration within the firm. 
B)  provide stock options to managers. 
C)  downsize the existing workforce. 
D)  organize economic activities within the firm.

Question 13

Discuss the application of the core competence-market matrix.
C. K. Prahalad advanced the core competence-market matrix, as a way to guide managerial decisions in regard to diversification strategies. The first task for managers is to identify their existing core competencies and understand the firm's current market situation. When applying an existing or new dimension to core competencies and markets, four quadrants emerge, each with distinct strategic implications.

Accepted Answer

To survive and prosper, companies need t

Question 14

Explain the two types of related diversification strategy with the help of examples.

Accepted Answer

Students' answers may vary.
There are tw

Question 15

Which of the following is true of the parent-subsidiary relationship?

Accepted Answer

A)  The ability to create a community of knowledge is low. 
B)  The parent firm has no control and command over the subsidiary. 
C)  The transaction costs that arise are frequently due to transfer prices. 
D)  The parent firm will lack specialization and division of labor. 
A)  The ability to create a community of knowledge is low. 
B)  The parent firm has no control and command over the subsidiary. 
C)  The transaction costs that arise are frequently due to transfer prices. 
D)  The parent firm will lack specialization and division of labor.

Question 16

A _____ is best defined as a company that combines two or more strategic business units under one overarching corporation and follows an unrelated diversification strategy.

Accepted Answer

A)  conglomerate 
B)  single-business firm 
C)  parent company 
D)  subsidiary 
A)  conglomerate 
B)  single-business firm 
C)  parent company 
D)  subsidiary

Question 17

_____ is best described as a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property.

Accepted Answer

A)  Lean manufacturing 
B)  Licensing 
C)  Crowdsourcing 
D)  Bootlegging 
A)  Lean manufacturing 
B)  Licensing 
C)  Crowdsourcing 
D)  Bootlegging

Question 18

_____ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.

Accepted Answer

A)  Venture capitalism 
B)  Bootlegging 
C)  Vertical integration 
D)  Crowdsourcing 
A)  Venture capitalism 
B)  Bootlegging 
C)  Vertical integration 
D)  Crowdsourcing

Question 19

Real Goods Inc.is a large conglomerate.The company's beverages strategic business unit (SBU)has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog.Which of the following can be inferred from this scenario?

Accepted Answer

A)  While the tobacco SBU operates in a low-growth market, the beverages SBU operates in a high-growth market. 
B)  The management of the company should use the cash inflow from the beverages SBU and invest it in the tobacco SBU. 
C)  While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low. 
D)  The tobacco SBU should follow a backward integration strategy, and the beverages SBU should pursue a forward integration strategy. 
A)  While the tobacco SBU operates in a low-growth market, the beverages SBU operates in a high-growth market. 
B)  The management of the company should use the cash inflow from the beverages SBU and invest it in the tobacco SBU. 
C)  While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low. 
D)  The tobacco SBU should follow a backward integration strategy, and the beverages SBU should pursue a forward integration strategy.

Question 20

A firm follows a(n)_____ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.

Accepted Answer

A)  related-constrained strategy 
B)  unrelated diversification strategy 
C)  differentiation strategy 
D)  dominant-business strategy 
A)  related-constrained strategy 
B)  unrelated diversification strategy 
C)  differentiation strategy 
D)  dominant-business strategy

Diversification premium is a situation in which:

What options do managers have to formulate corporate strategy once they have a clear understanding of their firm's core competencies?

Which of the following corporate strategies did ExxonMobil pursue by acquiring XTO Energy, a natural gas company?

How can a firm pursuing a diversification strategy enhance its overall corporate performance by leveraging financial economies?

Which of the following companies will be considered as a conglomerate?

How does a conglomerate benefit from following an unrelated diversification strategy?

What kind of businesses is categorized under stars in the Boston Consulting Group (BCG)growth-share matrix?

When do companies experience diversification discount and diversification premium?

The most efficient way to overcome the principal-agent problem in a firm is to:

Explain the two types of related diversification strategy with the help of examples.

Which of the following is true of the parent-subsidiary relationship?

A _____ is best defined as a company that combines two or more strategic business units under one overarching corporation and follows an unrelated diversification strategy.

_____ is best described as a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property.

_____ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.

Real Goods Inc.is a large conglomerate.The company's beverages strategic business unit (SBU)has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog.Which of the following can be inferred from this scenario?

A firm follows a(n)_____ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.

What Is Strategy

Strategic Leadership: Managing the Strategy Process

External Analysis: Industry Structure, Competitive Forces, and Strategic Groups

Internal Analysis: Resources, Capabilities, and Core Competencies

Competitive Advantage, Firm Performance, and Business Models

Business Strategy: Differentiation, Cost Leadership, and Blue Oceans

Business Strategy: Innovation, Entrepreneurship, and Platforms

Corporate Strategy: Strategic Alliances, Mergers and Acquisitions

Global Strategy: Competing Around the World

Organizational Design: Structure, Culture, and Control

Corporate Governance and Business Ethics

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Exam 8: Corporate Strategy: Vertical Integration and Diversification

Diversification premium is a situation in which:

What options do managers have to formulate corporate strategy once they have a clear understanding of their firm's core competencies?

Which of the following corporate strategies did ExxonMobil pursue by acquiring XTO Energy, a natural gas company?

How can a firm pursuing a diversification strategy enhance its overall corporate performance by leveraging financial economies?

Which of the following companies will be considered as a conglomerate?

How does a conglomerate benefit from following an unrelated diversification strategy?

What kind of businesses is categorized under stars in the Boston Consulting Group (BCG)growth-share matrix?

When do companies experience diversification discount and diversification premium?

The most efficient way to overcome the principal-agent problem in a firm is to:

Explain the two types of related diversification strategy with the help of examples.

Which of the following is true of the parent-subsidiary relationship?

A _____ is best defined as a company that combines two or more strategic business units under one overarching corporation and follows an unrelated diversification strategy.

_____ is best described as a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property.

_____ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.

Real Goods Inc.is a large conglomerate.The company's beverages strategic business unit (SBU)has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog.Which of the following can be inferred from this scenario?

A firm follows a(n)_____ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.

What Is Strategy

Strategic Leadership: Managing the Strategy Process

External Analysis: Industry Structure, Competitive Forces, and Strategic Groups

Internal Analysis: Resources, Capabilities, and Core Competencies

Competitive Advantage, Firm Performance, and Business Models

Business Strategy: Differentiation, Cost Leadership, and Blue Oceans

Business Strategy: Innovation, Entrepreneurship, and Platforms

Corporate Strategy: Strategic Alliances, Mergers and Acquisitions

Global Strategy: Competing Around the World

Organizational Design: Structure, Culture, and Control

Corporate Governance and Business Ethics

Filters