Question 1

Discuss the benefits of taper integration.

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Question 2

What is a conglomerate? How does it benefit from a diversification strategy?

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Question 3

List the five reasons why firms need to grow.

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Question 4

________, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another.
A) Coordination costs
B) Fixed costs
C) Agency costs
D) Network costs

Accepted Answer

A related-diversification strategy entails coordination costs, which are a function of the number, size, and types of businesses that are linked to one another.

Question 5

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

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Question 6

TimeEnough Inc. entered the low-priced digital watch market several years ago. This firm's earnings have been unsteady, but might be growing. According to the BCG growth matrix, TimeEnough is a
A) cash cow.
B) star.
C) dog.
D) question mark.

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According to the BCG growth matrix, TimeEnough is a question mark. Question marks have low, unstable earnings that might be growing.

Question 7

Discuss the underlying concepts that help executives make corporate strategic decisions.

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Question 8

What must executives decide when formulating a corporate strategy?

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Question 9

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

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Question 10

Describe the two types of vertical integration along the industry value chain.

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Question 11

A strategy of ________ will be most beneficial for a firm to enhance its overall corporate performance.
A) unrelated level of diversification
B) single-business level of diversification
C) dominant-business level of diversification
D) related-linked diversification

Accepted Answer

A strategy of related-constrained or related-linked diversification is more likely to enhance corporate performance than either a single or dominant level of diversification or an unrelated level of diversification. The reason is that the sources of value creation include not only restructuring, but more fundamentally, the potential benefits of economies of scope and scale.

Question 12

About 20 years ago, Sturdy Light, Inc., produced a sturdy, lightweight backpack in a market that was rapidly growing. Sturdy Light became a leader in this market. Eventually, the backpack market reached the maturity stage and slowed down. However, by this time, Sturdy Light had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario?
A) Sturdy Light was a star that developed into a cash cow.
B) Sturdy Light was a question mark that developed into a star.
C) Sturdy Light was a dog that developed into a question mark.
D) Sturdy Light was a cash cow that developed into a star.

Accepted Answer

Sturdy Light was a star that developed into a cash cow. A star holds a high market share in a fast-growing market. A cash cow holds a high market share in a low-growth market.

Question 13

Briefly discuss the application of the Boston Consulting Group (BCG) growth-share matrix.

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Question 14

Why are generic industry value chains called vertical value chains?

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Question 15

How are information asymmetries created? What are the implications?

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Question 16

Discuss the various general diversification strategies available to a firm.

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Question 17

________ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.
A) Fixed costs
B) Influence costs
C) Coordination costs
D) Opportunity costs

Accepted Answer

Influence costs occur due to political maneuvering by managers to influence capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.

Question 18

Discuss the application of the core competence-market matrix.

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Question 19

What are the advantages and disadvantages of organizing economic activity within firms?

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Question 20

What are the three types of specialized assets?

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Quiz 8: Corporate Strategy: Vertical Integration and Diversification