Deck 6: Corporate-Level Strategy

Question 1

Which of the following questions is addressed by an ownership test in determining the viability of international diversification?

A) What markets and businesses will the firm compete in?
B) Should the firm license or sell its resources to a foreign firm?
C) How will the business units of the firm be aligned?
D) Should the firm vertically integrate with other companies?

Answer 1

B

Question 2

Z-Furn is an organization that manufactures and sells office furniture.It maintains a good name in this business and has strong capital resources.The organization decides to purchase a failing food product business in order to tap into the market of that company.Which of the following types of diversification is the firm pursuing?

A) Related diversification
B) Unrelated diversification
C) International diversification
D) Single-product diversification

Answer 2

B

Question 3

Which of the following is a reason why managers pursue diversification strategies?

A) Increasing customer loyalty
B) The potential for gaining knowledge
C) The potential for personal gain
D) Improving employee commitment

Answer 3

C

Question 4

The test a manager uses to determine the viability of international diversification involves _____ test.

A) industry attractiveness
B) an ownership
C) cost of entry
D) a market power

Question 5

The ultimate goal of developing a corporate-level strategy is to build _____.

A) employee commitment
B) a corporate advantage
C) customer relationship
D) a wholly-owned subsidiary

Question 6

_____ occurs when one corporation owns business units that make inputs for other business units in the same corporation.

A) Globalization
B) Franchising
C) Vertical integration
D) International diversification

Question 7

The scope of a corporate-level strategy focuses on:

A) the manner in which activities of the firm will be coordinated.
B) the relationship between business units.
C) the markets and businesses the firm will compete in.
D) the internal environment affecting a firm's business.

Question 8

Which of the following questions is addressed by the organizational design of a firm's corporate-level strategy?

A) What markets and businesses will the firm compete in?
B) How will the business units of the firm be aligned?
C) What are the businesses to be acquired?
D) How will the resources of the firm be coordinated?

Question 9

Which of the following questions should be addressed by a manager to identify conditions that can create shareholder value?

A) How will the activities of the firm be coordinated?
B) How will the business units of the firm be aligned?
C) How attractive is the industry?
D) How to organize resources?

Question 10

A firm can pass the better-off test in determining the viability of international diversification when:

A) it licenses its resources to a foreign firm.
B) it can sell its existing product in a different country.
C) it acquires extremely low-cost industries.
D) it spends more time on implementation processes.

Question 11

Which of the following is the main motive for international diversification?

A) Support failing businesses
B) Understand social values
C) Create strategic flexibility
D) Achieve economies of scale

Question 12

Which of the following statements is an advantage of related diversification strategy?

A) Related diversification strategy allows a firm to maintain several businesses that are not connected in any way.
B) The sharing of resources is a key component of developing economies of scope and often increases a firm's competitive advantage.
C) Related diversification strategies often achieve financial economies through the restructuring of business units.
D) It can allow a sick or dying company to use capital generated in a profitable division to prop it up for a short period of time.

Question 13

Which of the following statements about the results of diversification is true?

A) Performance increases as firms change from related diversification to unrelated diversification.
B) Successful diversified organizations can balance centralized control levers with decentralized autonomy.
C) There is ample evidence that unrelated diversification strategy is unsuccessful in emerging economies.
D) Firms that failed with unrelated diversification have spent more time on implementation strategies and processes.

Question 14

_____ is a strategy is which a firm engages in several different businesses that may or may not be related in an attempt to create more value than if the businesses existed as stand-alone entities.

A) Franchising
B) Globalization
C) Outsourcing
D) Diversification

Question 15

In a single-product diversification strategy:

A) a firm attempts to develop core competencies in a specific market.
B) a firm owns numerous businesses that are linked in some manner.
C) a firm manages several businesses with no reasonable connection.
D) a firm's main focus is on establishing customer recognition and loyalty.

Question 16

_____ is created when a firm generates sustainable cost savings by combining duplicate activities or deploying underutilized assets across multiple businesses.

A) Value
B) Strategy
C) Synergy
D) Market power

Question 17

In _____ diversification strategy,a firm pursues businesses that share a similar set of tangible and intangible resources.

A) horizontal
B) single-product
C) unrelated
D) vertical

Question 18

The distinguishing factor between unrelated and related diversification strategy is that a firm using unrelated diversification strategy:

A) has numerous businesses that are linked in some manner.
B) manages several businesses with no reasonable connection.
C) focuses on one specific product,typically in one market.
D) develops core competencies using its resources and capabilities.

Question 19

The ultimate goal of an unrelated diversification strategy is to:

A) create financial economies.
B) support failing businesses.
C) enhance innovation.
D) expand globally.

Question 20

Which of the following statements is a downside of unrelated diversification strategy?

A) It does not allow a dying company to use capital generated in a profitable division to prop it up for a short period of time.
B) A firm cannot manage multiple businesses without any reasonable connections.
C) It is not possible to achieve financial economies.
D) It can open a firm to higher levels of risk and uncertainty.

Question 21

Firms pursuing related diversification to increase market power attempt to decrease the price at which they sell their products to levels below the normal prices found in the market.

Question 22

Firms diversify internationally to achieve economies of scale.

Question 23

In vertical integration,forward integration occurs when a firm:

A) attempts to achieve economies of scope.
B) controls the customers for its main products.
C) owns or controls the inputs it uses.
D) generates sustainable cost savings.

Question 24

Briefly explain the international scope test.

Question 25

_____ costs refer to the costs a firm incurs to coordinate activities between business units.

A) Franchising
B) Administrative
C) Outsourcing
D) Transaction

Question 26

Define vertical integration and its types.

Question 27

Corporate advantage occurs when a firm maximizes its resources to build a competitive advantage across its various business units.

Question 28

According to one key study,a firm's performance decreases as it shifts from single-business strategies to related diversification.

Question 29

Fine Electronics is a corporation that controls all aspects of its business such as extracting raw materials,manufacturing the products,distributing them,and finally marketing to customers.It manages these activities through several business units,where one unit provides inputs to the other.This is an example of _____.

A) unrelated diversification
B) vertical integration
C) strategic flexibility
D) franchising

Question 30

Firms that have excess capacity or potential in their physical assets or their intangible assets tend to pursue unrelated diversification.

Question 31

Transaction costs refer to the costs a firm incurs to coordinate activities between business units.

Question 32

According to one key study,performance increases as firms change from related diversification to unrelated diversification.

Question 33

Forward integration occurs when a firm owns or controls the customers or distribution channels for its main products.

Question 34

In vertical integration,backward integration occurs when a firm:

A) owns or controls the inputs it uses.
B) owns the distribution channels for its main products.
C) controls the primary activities involved.
D) controls the customers for its products.

Question 35

Why do managers pursue diversification strategies?

Question 36

Short-term contracts involve a firm's commitment to buy a commodity product at a specific price.

Question 37

The ultimate goal of an unrelated diversification strategy is to create some type of financial economies.

Question 38

Define diversification and describe its types?

Question 39

Discuss the results of diversification.

Question 40

The management of an automobile manufacturing company signed a contract with a consultancy that provides recruitment services.Though the organization was performing this function on its own previously,the management felt that the consultancy would offer a better service.Which of the following alternatives to vertical integration has the management opted?

A) Franchising
B) Exporting
C) Outsourcing
D) Licensing