Deck 8: Corporate Strategy: Vertical Integration and Diversification

Question 1

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

A) level of diversification.
B) geographic scope.
C) vertical integration.
D) absorptive capacity.

Answer 1

C
Explanation: The industry value chain describes the transformation of raw materials into finished goods and services along distinct vertical stages. This decision determines the firm's vertical integration.

Question 2

Which of the following statements is true of internal transaction costs?

A) Internal transaction costs arise when companies transact in the open market.
B) When the internal costs involved in pursuing an activity in-house are more than the costs of transacting, then the concerned firm should vertically integrate.
C) Internal transaction costs tend to increase with organizational size and complexity.
D) It is beneficial to "buy" goods or services rather than "make" when internal transaction costs are low.

Answer 2

C
Explanation: Internal transaction costs include administrative costs associated with coordinating economic activity between different business units of the same corporation such as transfer pricing for input factors, and between business units and corporate headquarters including important decisions pertaining to resource allocation, among others. Internal transaction costs tend to increase with organizational size and complexity.

Question 3

A primary advantage of organizing economic activity within firms is the

A) ability to coordinate highly complex tasks to allow for specialized division of labor.
B) low administrative costs because of reduced bureaucracy.
C) eradication of the principal-agent problem.
D) high-powered incentive to work as salaried employees for an existing firm.

Answer 3

A
Explanation: The advantages of organizing economic activity within firms include coordination of highly complex tasks to allow for specialized division of labor. Internal transaction costs include administrative costs associated with coordinating economic activity between different business units of the same corporation such as transfer pricing for input factors, and between business units and corporate headquarters including important decisions pertaining to resource allocation, among others.

Question 4

When approaching a bank for a loan,the borrower has better knowledge than the lender about his or her own ability to repay the loan without defaulting.What is this situation referred to as?

A) principal-agent problem
B) information asymmetry
C) experience-curve effect
D) learning-curve effect

Question 5

In the market for used cars,which of the following is a reason behind the crowding out of desirable cars by lemons or inferior ones?

A) experience-curve effects
B) time compression diseconomies
C) principal-agent problem
D) information asymmetry

Question 6

Hitoro Inc.developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time.The technology was leased to Revox Inc.,a consumer electronics company,for five years.Which of the following alternatives to integration does this best illustrate?

A) licensing
B) franchising
C) crowdsourcing
D) bootlegging

Question 7

_____ is best described as a situation in which one party is more informed than another,because of the possession of private information.

A) Information governance
B) Information asymmetry
C) Information deregulation
D) Information piracy

Question 8

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

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

Question 9

Grace Apparel Inc.has decided to procure fabrics required for its garments from external suppliers instead of maintaining its own dyeing and weaving facilities.How will this decision affect the firm?

A) The firm will be protected against the principal-agent problem.
B) The firm's administrative costs will be low because of necessary bureaucracy.
C) The firm will have more flexibility in purchasing and comparing prices of goods and services.
D) The firm will have high-powered incentives, such as hourly wages and salaries.

Question 10

A drawback of short-term contracting as an alternative to making a component in-house is that

A) it is the most-integrated alternative to performing an activity so the principal company has no control over the agent.
B) the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.
C) it fails to allow a long planning period that individual market transactions provide.
D) the buying firm cannot demand lower prices due to the lack of a competitive bidding process.

Question 11

Which of the following is an example of an external transaction cost?

A) the cost of setting up a production unit
B) the cost of searching for a contract manufacturer
C) the cost of recruiting and retaining employees
D) the cost of maintaining plant and machinery

Question 12

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests.What does this best illustrate?

A) diseconomies of scale
B) principal-agent problem
C) experience-curve effects
D) information asymmetries

Question 13

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

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 14

Chao is in an interview for a sales job that requires no experience.He is trying to portray himself as a highly enthusiastic,energetic person with high-level communication and interpersonal skills.The interviewer is convinced that Chao should be hired as a salesperson in the company.However,in his resume,Chao had not mentioned his previous work experience as he was fired from that job because he used illegal drugs.Which of the following does this scenario best illustrate?

A) information asymmetry
B) principal-agent problem
C) experience-curve effect
D) learning-curve effect

Question 15

Which of the following firms is least integrated?

A) a firm that enters a joint venture with another company to develop a new technology
B) a firm that owns production subsidiaries across the globe
C) a firm that makes equity investments in its supplier's company
D) a firm that buys all the required raw materials from multiple external vendors

Question 16

Which of the following statements is true of transaction costs?

A) When the costs of pursuing an activity in-house are more than the costs of transacting for that activity in the market, then the concerned firm should vertically integrate.
B) When companies transact in the open market, they incur internal transaction costs.
C) Transaction costs exclusively consist of external costs associated with economic exchanges.
D) Transaction costs are necessary to explain and predict the boundaries of a firm.

Question 17

Amazon.com has decided to enter the college bookstore market.The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia,such as logo sweaters and baseball hats.This development shows Amazon's relentless pursuit of

A) geographic diversification.
B) product diversification.
C) vertical integration.
D) horizontal integration.

Question 18

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?

A) the first-line employees
B) the creditors
C) the chief executive officer
D) the middle manager

Question 19

_____ are best described as voluntary arrangements between firms that involve the sharing of knowledge,resources,and capabilities with the intent of developing processes,products,or services to lead to competitive advantage.

A) Embargos
B) Cartel agreements
C) Strategic alliances
D) Corporate acquisitions

Question 20

Which of the following is an example of an internal transaction cost?

A) the cost of searching for a contract manufacturer
B) the cost of signing a contract with a supplier
C) the cost of buying raw materials
D) the cost of maintaining a production unit

Question 21

Virtue Products Inc.,a large conglomerate,procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries.This apart,the company does not solely depend on outside distributors to reach its customers.In fact,it has its own retail stores to distribute its products.In this scenario,which of the following alternatives to vertical integration is Virtue Products applying?

A) concentric integration
B) taper integration
C) horizontal integration
D) conglomerate integration

Question 22

Investments in specialized assets tend to incur high opportunity costs because the

A) assets can be profitably used for multiple purposes.
B) threat of one of the partners pursuing his or her self-interest is high.
C) social costs associated with these assets are high.
D) firms can avoid backward integration by investing in these assets.

Question 23

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

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

Question 24

Which of the following best illustrates site specificity?

A) equipment necessary for mining bauxite and aluminum smelting
B) bottling machinery to manufacture bottles with trademarked shapes
C) investment made in human capital to master procedures of a specific organization
D) investment made to train employees to operate computers

Question 25

Which of the following best illustrates forward vertical integration?

A) A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.
B) A chain of ice cream parlors launches a brand of toys and accessories for children.
C) A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam.
D) A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery.

Question 26

Divina Pharma Inc.and MF Electronics Inc.have together invested and created a new organization,FirstHealth Inc.,to focus on developing diagnostic devices.Through this new firm,both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments.However,the new organization operates independent of Divina Pharma and MF Electronics.Which of the following alternatives to integration does this scenario best illustrate?

A) a joint venture
B) a franchisee
C) a licensing contract
D) a corporate acquisition

Question 27

Stellar Products Inc.is a U.S.-based consumer electronics company.It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide.Which of the following alternatives to integration does this best illustrate?

A) venture capitalism
B) franchising
C) joint venture
D) parent-subsidiary relationship

Question 28

Neon Electronics Inc.sourced touch screens required for its tablet computers,cell phones,and televisions from a manufacturer in China.But the demand for such components was high globally,and the supplier could not meet the quality standards of Neon Electronics.Thus,Neon Electronics decided to set up its own unit to develop and manufacture the required touch screens.What does this scenario best illustrate?

A) crowdsourcing
B) new product development
C) backward vertical integration
D) conglomerate diversification

Question 29

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

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 30

_____ is best described as changes in an industry value chain that involve moving ownership of activities closer to the end (customer)point of the value chain.

A) Forward vertical integration
B) Corporate divestiture
C) Reverse engineering
D) Closed innovation

Question 31

When Toyota wanted to secure a long-term supply of lithium,it had to create a bond of trust with an Australian company,Orocobre Ltd.Orocobre wanted to establish the bond of trust before making huge investments in specialized equipment required to extract the high-quality lithium.What did Toyota do to instill this trust?

A) It offered Orocobre exposure to Toyota's proprietary information.
B) It made a credible commitment by taking an equity stake in Orocobre.
C) It acquired Orocobre as part of its backward vertical integration plans.
D) It offered Orocobre franchising opportunities to sell hybrid vehicles.

Question 32

Silver Weave Inc.,an apparel company,operates through a business model in which individuals can buy the rights to set up Silver Weave stores and sell the company's merchandise in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month.The owners of the stores have to stock the collection approved from the company's headquarters and also maintain consistent customer service as expected in its flagship store.Which of the following alternatives to integration does this best illustrate?

A) crowdsourcing
B) credit rationing
C) franchising
D) bootstrapping

Question 33

GreenCure Pharma Inc.wanted its research partner,an R&D company,to develop a cancer vaccine.However,the project required huge capital investments,and its research partner was not ready to solely face the risks involved.Thus,to gain its partner's confidence and to prove its involvement,GreenCure Pharma invested $100 million in the project.This investment made by GreenCure Pharma will result in a

A) cartel.
B) credible commitment.
C) corrective action.
D) parent-subsidiary relationship.

Question 34

Each stage of the vertical value chain typically represents a distinct _____ in which a number of different firms are competing.

A) industry
B) functional department
C) economy
D) customer segment

Question 35

Which of the following alternatives on the make-or-buy continuum allows for most integration?

A) short-term contracting
B) joint ventures
C) licensing
D) parent-subsidiary relationship

Question 36

Apple and Nike have their own retail outlets and also use other independent retailers,both the brick-and-mortar type and online,to sell their products.This is an example of

A) monopsony.
B) geographic diversification.
C) crowdsourcing.
D) taper integration.

Question 37

_____ are best described as unique assets with high opportunity costs that have significantly more value in their intended use than in their next-best use.

A) Cost drivers
B) Value drivers
C) Specialized assets
D) Liquid assets

Question 38

A(n)_____ is best used to depict the transformation of raw materials into finished goods and services along distinct vertical stages.

A) encrypt
B) chain of command
C) industry value chain
D) scatter chart

Question 39

How do firms benefit from vertical integration?

A) Vertical integration allows firms to reduce organizational complexity and administrative costs.
B) Firms that vertically integrate will have increased strategic flexibility when faced with technological changes.
C) Firms that vertically integrate do not have to make transaction-specific investments.
D) Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.

Question 40

Which of the following best illustrates physical-asset specificity?

A) a unique training program developed in an organization
B) a ship container designed to carry more than the average load of iron ore
C) a generic machine that can be used to churn different mixtures
D) a machine solely designed to give a candy its trademarked shape

Question 41

A firm that engages in strategic outsourcing typically

A) increases its internal transaction costs.
B) reduces its level of vertical integration.
C) reduces its level of external transaction costs.
D) increases its level of horizontal integration.

Question 42

PepsiCo operates in many countries and sells a wide variety of aerated drinks,other beverages,different types of chips,and Quaker Oats goods to achieve continuous growth.From this data,we can conclude that PepsiCo has been involved in

A) strategic outsourcing.
B) lean manufacturing.
C) product-market diversification.
D) process diversification.

Question 43

When a firm is said to be pursuing a geographic diversification strategy,it means that the firm will

A) introduce different products and services in an existing single market.
B) sell its products in several different regional, national, and international markets.
C) operate from multiple headquarters across the globe.
D) depend solely on its in-house facilities for all its production purposes.

Question 44

Fantastica Industries,a U.S.-based large conglomerate,competes in the hospitality,education,telecommunications,entertainment,airlines,and chemical industries.It currently operates in about 30 nations,and is planning to expand its portfolio by investing in rapidly developing countries.Which of the following strategies is Fantastica Industries pursuing?

A) zone pricing
B) niche marketing
C) product-market diversification strategy
D) process diversification strategy

Question 45

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources,it can be concluded that the firm is using

A) related-constrained diversification.
B) related-linked diversification.
C) strategic outsourcing.
D) offshore outsourcing.

Question 46

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

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 47

_____ is best described as moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain.

A) Strategic outsourcing
B) Reverse engineering
C) Forward integration
D) Horizontal integration

Question 48

Which of the following statements is true of taper integration?

A) It is the most integrated alternative to performing an activity within one's own corporate family.
B) It refers to a situation in which firms narrow their focus on downstream value chain activities and ignore the upstream value chain activities.
C) It exposes in-house suppliers and distributors to market competition to make performance comparisons possible.
D) It does not rely on outside-market firms for its supplies.

Question 49

Red Empire Inc.,a large multinational company owned by two partners,is active in the petroleum,capital market,chemicals,steel,beverages,hospitality,airlines,education,automobiles,and consumer electronics industries.The company has multiple brands and a large product portfolio under its banner.Which of the following terms would best describe this company?

A) a flagship brand
B) a single-business firm
C) a dominant-business firm
D) a conglomerate

Question 50

Symphon Times Inc.,a Swiss-based premium watch brand,has recently started selling its watches through company-owned retail outlets in major cities of the emerging nations.Which of the following types of diversification strategies is the firm pursuing?

A) product diversification strategy
B) process diversification strategy
C) geographic diversification strategy
D) product-market diversification strategy

Question 51

Today,many companies use PeopleSoft and EDS to avoid maintaining a human resource management system.By doing this,these firms are

A) engaging in strategic outsourcing.
B) increasing their level of vertical integration.
C) offshoring their core activities.
D) engaging in unrelated diversification.

Question 52

White Leo Motors (WLM)Inc.generates a major portion of its revenues by manufacturing luxury sports cars.However,the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel,shoes,and other accessories under the same brand name.Which of the following terms best describes WLM?

A) a conglomerate
B) a subsidiary
C) a dominant-business firm
D) a single-business firm

Question 53

While KFC focuses on international markets,its competitor,Chick-fil-A,focuses on the domestic U.S.market.What is the reason behind this strategic difference?

A) KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company.
B) Chick-fil-A has a larger customer base and number of outlets in the U.S. market than its competitor KFC.
C) KFC wants to follow a differentiation strategy, and Chick-fil-A wants to pursue a cost-leadership strategy.
D) Chick-fil-A is part of a large conglomerate, whereas KFC has more flexibility to pursue a geographic diversification strategy.

Question 54

BM Goods Inc.is a large conglomerate that operates only in its home country.The company competes in industries like the consumer electronics,health care,hotel,airlines,education,and steel industries.Which of the following diversification strategies does this best illustrate?

A) process diversification
B) product diversification
C) geographic diversification
D) market diversification

Question 55

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

A) taper integration strategy
B) differentiation strategy
C) related diversification strategy
D) cost-leadership strategy

Question 56

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.

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

Question 57

Evara Inc.started as a luxury brand for designer apparel.Soon,the company expanded by launching its own line of premium perfumes,watches,bags,and home furnishings.This expansion allowed the businesses under the company to share a few,if not all,of the common competencies in products,services,technology,and distribution.Which of the following corporate strategies is Evara pursuing in this scenario?

A) taper integration strategy
B) niche marketing strategy
C) related-constrained strategy
D) related-linked strategy

Question 58

TL & Co.is following a related-linked diversification strategy,and Soar Inc.is following a related-constrained diversification strategy.How do the two firms differ from each other?

A) Soar Inc. generates 70 percent of its revenues from its primary business, while TL & Co. generates only 10 percent of its revenues from its primary business.
B) Soar Inc. pursues a backward diversification strategy, while TL & Co. pursues a forward diversification strategy.
C) TL & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc.
D) TL & Co. pursues a differentiation strategy, and Soar Inc. pursues a cost-leadership strategy, to gain a competitive advantage.

Question 59

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.

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

Question 60

_____ is best described as an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes.

A) Taper integration
B) Open innovation
C) Diversification
D) Differentiation

Question 61

In the context of the Boston Consulting Group (BCG)growth-share matrix,if one of the strategic business units of a conglomerate is categorized under dogs,the management should

A) infuse more capital into the strategic business unit.
B) provide more human resources to the business.
C) hold the business till it turns into a star.
D) divest the strategic business unit.

Question 62

WJ Group Inc.,a large multinational conglomerate,had begun to experience declining revenues over the years.The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies.Thus,a few of the company's key businesses like energy,telecommunications,and automobiles were centralized,giving the top management more control over them.Also,relatively newer businesses like beverages and food processing were divested.In this scenario,WJ Group is involved in

A) reverse engineering.
B) benchmarking.
C) restructuring.
D) crowdsourcing.

Question 63

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

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

Question 64

In the Boston Consulting Group (BCG)growth-share matrix,strategic business units categorized under dogs

A) compete in a low-growth market but hold considerable market share.
B) hold a high market share in a fast-growing market.
C) compete in a high-growth market but have low and unstable earnings.
D) hold a small market share in a low-growth market.

Question 65

PrimoDisk Inc.holds the highest market share in the low-growth compact disk industry.With the introduction of flash drives,the market for compact disks has reduced.However,PrimoDisk has been able to generate sufficient revenues for the parent company by selling its products in less developed countries.In the Boston Consulting Group (BCG)growth-share matrix,PrimoDisk will be categorized under

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

Question 66

_____ are strategic business units that compete in a low-growth market but hold considerable market share.

A) Dogs
B) Question marks
C) Cash cows
D) Stars

Question 67

Diversification premium is a situation in which

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 68

_____ is best described as the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully.

A) Reverse engineering
B) Restructuring
C) Rebooting
D) Reverse brainstorming

Question 69

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

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 70

In 2007,Salesforce.com recognized an emerging market for platform as a service (PaaS)offerings and developed a new competency in delivering software development and deployment tools.This allowed its customers to either extend their existing CRM offering or build completely new types of software.This is an example of

A) leveraging existing core competencies to improve current market position.
B) building new core competencies to achieve vertical integration.
C) redeploying and recombining existing core competencies to compete in markets of the future.
D) building new core competencies to create and compete in markets of the future.

Question 71

Companies that pursue related diversification are able to create a diversification premium because they

A) are able to leverage time compression economies.
B) can operate beyond the minimum efficient scale.
C) are able to increase value due to economies of scope.
D) can reduce the value gap created by its products.

Question 72

Vehmo Inc.is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars.The company realizes that more of its potential customers are switching to electric cars.The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car.In this scenario,Vehmo is primarily

A) leveraging new core competencies to improve current market position.
B) redeploying existing core competencies to compete in future markets.
C) unlearning existing core competencies to create and compete in markets of the future.
D) building new core competencies to protect and extend current market position.

Question 73

Coca-Cola was primarily known for its core competencies in marketing,bottling,and distributing aerated drinks.However,with the success of Gatorade,Coca-Cola developed competencies in the development and marketing of its own sports drink,Powerade.Which of the following is true of Coca-Cola?

A) It is leveraging existing core competencies to improve current market position.
B) It is building new core competencies to protect and extend its current market position.
C) It is redeploying and recombining existing core competencies to compete in markets of the future.
D) It is targeting the chasm between the early adopter and early majority market segment.

Question 74

ESB 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 ESB Group created?

A) capital liquidity
B) diversification premium
C) diversification discount
D) demand-pull inflation

Question 75

The core competency of MotorCraft Inc.is its fuel-efficient engine found in its cars.These engines are developed and built in-house.The company realizes that there is a new market opportunity to diversify.Thus,it produces the car engines on a large scale and sells them to other automobile companies.In this scenario,MotorCraft is

A) leveraging existing core competencies to target the chasm between the early adopter and early majority market segment.
B) redeploying and recombining existing core competencies to compete in future markets.
C) building new core competencies to create and compete in future markets.
D) building new core competencies to protect and extend current market position.

Question 76

If a strategic business unit is recognized as a cash cow,it is advisable to

A) harvest the business.
B) invest into the business to hold its current position.
C) divest the business due to its low market share.
D) maintain it till it turns into a dog.

Question 77

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?

A) diversification discount
B) learning-curve effects
C) experience-curve effects
D) economies of scale

Question 78

The Boston Consulting Group (BCG)growth-share matrix locates a firm's individual strategic business units (SBUs)in which two dimensions?

A) start-up capital required and stage of industry life cycle
B) relative market share and speed of market growth
C) economic value created and costs incurred
D) amount of debt financing and equity financing

Question 79

Which of the following firms is most prone to experiencing a diversification discount?

A) a company that deals in petroleum as well as natural gas
B) a company that derives its revenues from selling aerated drinks and health drinks
C) a company that pursues unrelated diversification
D) a company that pursues related-constrained diversification

Question 80

With reference to the Strategy Highlight 8.2,the Tata Group's corporate strategy is attempting to

A) move from unrelated diversification to related-constrained diversification.
B) integrate different strategic positions, pursued by different strategic business units.
C) pursue a focused differentiation strategy over a focused cost-leadership strategy.
D) depend on a single product market to generate most of its revenues.