Exam 12: Diversification Strategy

Which of the following is not an example of an economy of scope from diversification?

In principle,the information advantages of a diversified company mean that internal capital markets are more efficient than external capital markets.In practice internal capital markets tend not to reallocate investment funds from poorly-performing subsidiaries to highly-performing subsidiaries.

Despite the heterogeneity of the goods and services supplied by LVMH (e.g.leather bags and shoes,wine and spirits,fashion clothing,jewelry and watches),we can consider LVMH's diversification to be into strategically-related industries because:

Demand-side economies of scope can justify diversification by a firm even if it doesn't achieve cost savings from supplying multiple products.

Porter's "three essential tests" help to determine:

A major reason for the trend to corporate refocusing after 1980 was a shifting of corporate goals from growth to profitability.

The statement: "Economies of scope in shared resources do not provide a sufficient justification for diversification" is:

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

If a utility company supplies both gas and electricity to its customers,it can exploit economies of scope in billing and customer service.

Diversification whose sole impact is to reduce the variability of profits does not create value for shareholders because:

The key difference between economies of scale and economies of scope:

Diversification that reduces unsystematic risk is likely to be associated with less variance of a firm's cash flows.This is likely to benefit:

The failure of empirical research to find unambiguous evidence that related diversification outperforms unrelated evidence points to:

The emergence of "conglomerates"-widely diversified companies-during the 1960s and 1970s was a result of:

If a company can deploy its intellectual property in a different industry,the higher are the transaction costs of licensing that intellectual property,the more likely it is that the firm will choose to diversify into that industry.

One reason for the inconsistent findings over the relative performance of related diversification and unrelated diversification is uncertainty and imprecision over what constitutes related diversification

The general trend of the past four decades has been for companies to divest their "noncore" businesses.Exceptions to this trend include:

The history of diversification since the mid-20^th century features two periods: during 1950 to 1980,the trend was to diversify;since 1980,most large companies have refocused upon their core businesses.

The key drivers of diversification for most of the 20^th century were:

Harold Geneen's statement that: "Telephones,hotels,insurance-it's all the same.If you know the numbers inside out,you know the company inside out" is basically correct: the essentials of a business are revealed by its metrics;industry-specific knowledge is not essential to the effective running of a business.