Deck 6: Multiproduct Strategies

Question 1

Firms using the unrelated-diversified multiproduct strategy dominate the private sector in Latin American countries, Korea, China, and India.

Answer 1

True

Question 2

Firms using the unrelated strategy emphasize operational competencies to create economies of scope.

Answer 2

False

Question 3

In general, it is easier to create financial economies by restructuring the assets of firms in high-technology business than firms in low-technology businesses.

Answer 3

False

Question 4

The highest level of diversification is

A) related constrained
B) related linked
C) unrelated
D) unconstrained

Question 5

Firms use multiproduct strategies to diversify for all of the following reasons except

A) smoothing out revenue and earnings flows.
B) reducing the risk of having a single product line.
C) developing economies of scale.
D) gaining exposure to different technologies.

Question 6

Large firms in the U.S. are most likely to use the dominant business multiproduct strategy.

Question 7

The external capital market allocates resources to divisions according to their probability of generating excess returns on the firm's borrowed financial capital in the competitive form of the M-form organizational structure.

Question 8

Restructuring can create financial economies when a firm buys another company's assets with the intention of selling them as soon as it finds ways to make the assets more productive.

Question 9

Valve-Tech manufactures valves for pipelines for the oil industry. The company has been in this business for the past 35 years, and focuses exclusively on valves. As a specialist in all variety of valves for oil pipelines, it is widely known and respected in the oil industry. Valve-Tech is an example of a ____ multiproduct strategy.

A) single business
B) dominant business
C) related constrained
D) related linked

Question 10

If a domestic firm using a dominant-business multiproduct strategy decides to market its products internationally, it will move to a multidivisional structure.

Question 11

Textron's success can be traced to its use of the unrelated diversification multiproduct strategy.

Question 12

Strategic business units are found in related linked diversification strategies.

Question 13

Loganfield Papers generates 80% of its revenues from its extensive line of papers for watercolor artists. The remaining 20% of its revenues come from a line of specialty papers it sells to printers of greeting cards. This company is using the unrelated diversification multiproduct strategy.

Question 14

Bell Tower Productions produces educational videos for use in private religious-based elementary schools. This generates approximately 80 percent of Bell Tower's revenues. As a side line, the company also produces videos for use by churches for Sunday school classes and church summer camps. Bell Tower is using the ____ diversification multiproduct strategy.

A) single business
B) dominant business
C) related-diversification
D) unrelated-diversification

Question 15

The sharing of tangible resources among businesses within an SBU is easier than transferring intangible core competencies among the same businesses.

Question 16

Divisional managers bear the main responsibility for insuring that managers do not over-diversify the organization.

Question 17

Multiproduct strategies apply to diversified manufacturers, not to organizations which provide services.

Question 18

A poorly-performing SBU in a firm using the unrelated-diversification multiproduct strategy is liable to be disciplined by being allocated fewer resources.

Question 19

A key objective of division heads in the SBU form of the M-form structure is to determine whether two or more divisions' resources could be combined to create an intangible capability that could become a core competence.

Question 20

Because less than 70 percent of its sales revenues come from any one business and because some resources and activities that are needed to produce and sell products and services in different markets are shared across businesses, Hewlett-Packard is using the ____ multiproduct strategy.

A) related linked
B) related constrained
C) unrelated diversification
D) dominant business

Question 21

Fresh from Nature, Inc., has several lines of heat-and-eat frozen foods sold in grocery stores. These include the Auntie Jean line of American-style casseroles, the Tia Juana line of Mexican foods, and the Oma Gertie line of German and East European dishes. Fresh from Nature contracts with a dozen producers of organic beef, pork, and chicken which it provides to all three food lines. This is an example of ____ relatedness.

A) economic
B) corporate
C) operational
D) competency

Question 22

When the businesses within an organization share some products, markets, or technologies and each business generates less than 70 percent of the sales revenue of the organization, the firm is using the ____ diversification multiproduct strategy.

A) related-constrained
B) related-linked
C) unrelated
D) nondominant

Question 23

A typical risk with resource sharing in the attempt to achieve economies of scope is that

A) supply of the resource may not match the demand for the resource.
B) resources shared internally tend to be more expensive than those acquired externally.
C) the quality of resources generated internally is usually not as high as those acquired externally.
D) the organization tends to over-rely on internal supplies of resources.

Question 24

In the related-linked diversification strategy, strategic business units (SBUs)

A) share resources, activities, and core competencies within and between SBUs.
B) share resources, activities, and core competencies only with the SBU.
C) share resources, activities, and core competencies only between SBUs.
D) do not share resources, activities, and core competencies among product divisions even within the SBU.

Question 25

In an organization using the unrelated-diversification multiproduct strategy, if an SBU is performing poorly, it will either be disciplined by headquarters changing its resource allocation or it will be

A) partitioned.
B) divested.
C) absorbed.
D) dissolved.

Question 26

The ____ M-form structure uses horizontal integration so that resources and activities can be shared among product divisions.

A) cooperative
B) SBU form
C) competitive
D) collaborative

Question 27

Another term for companies that use the unrelated-diversification multiproduct strategy is

A) combinations.
B) aggregations.
C) global organizations.
D) conglomerates.

Question 28

Profit centers are a dominant feature of the ____ form of the M-form structure.

A) cooperative
B) collaborative
C) competitive
D) SBU

Question 29

In a firm using the unrelated-diversification multiproduct strategy, the organizations' corporate headquarters personnel act as ____ for the entire organization.

A) a capital market
B) a coordinator of tangible resources
C) a source of core competencies
D) a separate SBU

Question 30

The main reason that an internal capital market would generate superior returns for shareholders as compared with external capital markets is

A) the effective transfer of core competencies within an internal capital market.
B) the increased operational and corporate relatedness generated by an internal capital market.
C) the improved access to information about SBUs.
D) the higher motivation by managers of SBUs when competing for funds.

Question 31

Managerial motives to diversify their organizations include all except

A) to increase their compensation by increasing the organization's size.
B) to reduce the risk of total failure of the firm.
C) to reduce the challenge of managing the organization.
D) to make their job more secure.

Question 32

Cost savings that the firm accrues when it successfully shares some of its resources and activities or some of its core competencies between its businesses are called

A) core economies.
B) economies of competence.
C) economies of scope.
D) economies of scale.

Question 33

Firms that use the related linked diversification multiproduct strategy create economies of scope by achieving ____ relatedness.

A) corporate
B) competency
C) operational
D) both operational and corporate

Question 34

Bravissimo Nutriceuticals was bought by MegaVitamin, Inc. Bravissimo was restructured by MegaVitamin, and resold for a price more than MegaVitamin's investment. Which of the following statements is true?

A) This is an example of a successful unrelated-diversification multiproduct strategy by MegaVitamin.
B) This is an example of a typical conglomerate strategy, such as is practiced in Latin America.
C) This is an example of a successful related linked diversification strategy by MegaVitamin.
D) This is an example of a failed related constrained diversification strategy by Bravissimo.

Question 35

The main check on managerial desires to over-diversify the firm is/are the

A) external capital markets.
B) internal capital market.
C) shareholders.
D) board of directors.

Question 36

Temporary teams or task forces that cross organizational divisions are most likely to be used in the ____ version of the M-form structure.

A) SBU form
B) cooperative
C) competitive
D) collaborative

Question 37

Firms which have successfully achieved both operational relatedness and corporate relatedness

A) are termed diversified corporations.
B) are unstable because of the difficulty of maintaining this "hybrid" strategy.
C) are difficult for competitors to imitate.
D) rely almost entirely on the transfer of intangible core competencies for their success.

Question 38

In the SBU form of the M-form structure, headquarters staff use ____ controls to evaluate the performance of each SBU.

A) strategic
B) marketing
C) financial
D) operational

Question 39

Kohl's sells an array of products while using the ____ multiproduct strategy.

A) related constrained
B) dominant business
C) single business
D) related linked

Question 40

Crested Eagle Enterprises uses the related linked multiproduct strategy. One of its businesses developed in-depth marketing knowledge of the Northwest region of the U.S. which has traditionally been a weak spot for Crested Eagle's businesses. This marketing knowledge is being transferred throughout Crested Eagle's businesses through a series of seminars and training courses. This is an example of

A) operational transference.
B) corporate relatedness.
C) operational relatedness.
D) competency transference.

Question 41

What are the three types of M-form structure and which of the diversification multiproduct strategies does each fit? What key aspect of each structure is appropriate for each strategy?

Question 42

Why would CEOs and presidents of organizations seek to diversify beyond the point where the diversification benefits the organization? What is the main protection for the organization from this overdiversification?

Question 43

Firms using the unrelated-diversification multiproduct strategy use the ____ form of the M-form structure.

A) competitive
B) SBU
C) cooperative
D) collaborative

Question 44

Division managers in the ____ form of the M-form structure would have very little contact with one another and would have little or no motivation to form relationships across divisions.

A) cooperative
B) SBU
C) competitive
D) collaborative

Question 45

Explain the differences among the following levels of diversification in terms of the two value-creating strategies: related constrained, related linked, and unrelated. Define the two value-creating strategies.

Question 46

Explain the difference between the unrelated diversification strategy and the two related-diversification strategies in terms of how they create the economies that make them successful.