Question 1

When firms share activities across units, they are often able to achieve increased value.

Accepted Answer

Sharing activities across units, also known as "synergies," can lead to increased efficiency and cost savings for a company. This is often achieved through sharing resources, knowledge, and capabilities, which can lead to improved coordination and collaboration across units. Therefore, it is true that firms are often able to achieve increased value through sharing activities across units.

Question 2

Compared with related constrained firms, related linked firms share fewer resources and assets between their businesses, concentrating instead on transferring knowledge and core competencies between the businesses.

Accepted Answer

Related linked firms focus more on knowledge and core competency transfer between their businesses, rather than resource and asset sharing like related constrained firms do.

Question 3

In a money-making effort, a small private university has decided to institute consulting services using its business faculty as consultants whose services would be sold to clients. This university is attempting to use its faculty to gain economies of scope.

Accepted Answer

Economies of scope refer to the cost savings and efficiencies that result from utilizing resources, such as faculty members, for multiple purposes or services within the same organization. In this case, the small private university is utilizing its business faculty for both teaching and consulting services, which can result in cost savings and efficiencies.

Question 4

An effective corporate strategy creates aggregate returns across all businesses that exceed what those returns would be without the strategy and contributes to the firm's strategic competitiveness and ability to earn above-average returns.

Accepted Answer

An effective corporate strategy should create synergy between businesses and lead to increased overall returns for the company, contributing to strategic competitiveness and above-average returns.

Question 5

Decisions to expand a firm's portfolio of businesses to reduce managerial risk can have a positive effect on the firm's value.

Accepted Answer

The answer of Decisions to expand a firm's portfolio of...

Question 6

A major advantage of diversification is that overall monitoring costs are reduced because each separate business comes under the control of corporate headquarters.

Accepted Answer

The answer of A major advantage of diversification is that...

Question 7

Related linked firms share more resources and assets between their businesses than do related constrained firms.

Accepted Answer

The answer of Related linked firms share more resources and...

Question 8

Procter & Gamble (P&G) has a paper towel and baby diaper business that both use paper products. This is an example of value created through the sharing of activities.

Accepted Answer

Procter & Gamble is able to benefit from the shared use of paper products between its paper towel and baby diaper businesses, thus creating value through the sharing of activities.

Question 9

Disney (discussed in the Chapter 6 Opening Case) is an example of a company that was successful because its corporate strategy added value across its set of businesses above what the individual businesses could create individually.

Accepted Answer

Disney's corporate strategy of leveraging its brand, intellectual property, and cross-promotion among its various businesses in theme parks, movies, merchandise, and media helped to create synergies and competitive advantages that individual businesses could not achieve on their own. This corporate-level value creation is a key element of successful diversification strategies.

Question 10

Antitrust regulation, tax laws, and low performance are all value-neutral reasons why firms engage in diversification.

Accepted Answer

Antitrust regulation, tax laws, and low performance are external factors that can affect a firm's decision to diversify and are not based on moral or ethical considerations, making them value-neutral.

Question 11

Corporate-level strategies are strategies a firm uses to diversify its operations from a single business competing in a single market into several product markets and, most commonly, into several businesses.

Accepted Answer

The answer of Corporate-level strategies are strategies a firm uses...

Question 12

In the Chapter 6 Opening Case, Disney achieved growth and diversification through mergers and acquisitions.

Accepted Answer

The answer of In the Chapter 6 Opening Case, Disney...

Question 13

Economies of scope are cost savings resulting from a firm successfully leveraging, either through sharing or transferring, some of its capabilities and competencies developed in one business to another business.

Accepted Answer

Economies of scope refer to the cost savings a company can achieve by sharing or transferring its capabilities and competencies across different business units. This allows the company to achieve efficiency and reduce costs by leveraging the resources it already has. Therefore, the statement is true.

Question 14

If the businesses in the corporate portfolio are not worth more under the management of the corporation than they would be under any other ownership, then the corporate-level strategy has failed.

Accepted Answer

The goal of corporate-level strategy is to create value for shareholders by managing a portfolio of businesses, and this can only be achieved if the businesses are worth more under the management of the corporation than they would be under any other ownership. If this is not the case, then the corporate-level strategy has failed.

Question 15

Revenues for United Parcel Service (UPS) are derived from the following business segments: 60 percent from U.S. package delivery operations, 22 percent from international package delivery, and 18 percent from non-packaging operations. The best description of the corporate level strategy of UPS is unrelated diversification.

Accepted Answer

The answer of Revenues for United Parcel Service (UPS) are...

Question 16

All of Krispy Kreme's revenues come from its one main product, doughnuts. It can be considered a classic example of a firm following a related constrained strategy.

Accepted Answer

The answer of All of Krispy Kreme's revenues come from...

Question 17

Firms using the related constrained strategy share activities in order to create value.

Accepted Answer

The related constrained strategy involves sharing activities among businesses in order to create value. This allows the firms to leverage their resources and capabilities across different business units, which can lead to cost savings and competitive advantages.

Question 18

Successful product diversification is expected to increase the variability in the firm's profitability because the earnings are generated from several different business units.

Accepted Answer

Successful product diversification typically reduces the variability in a firm's profitability by spreading risk across different products or markets, leading to more stable earnings.

Question 19

United Technologies, Textron, Samsung, and Hutchison Whampoa Limited are examples of diversified firms that have no relationships between their businesses. These firms all use the strategy of unrelated diversification.

Accepted Answer

These firms have no relationships between their businesses and use the strategy of unrelated diversification.

Question 20

A firm uses a corporate-level diversification strategy for a variety of reasons, all of which have to do with ways to create value.

Accepted Answer

The answer of A firm uses a corporate-level diversification strategy...

Quiz 6: Corporate-Level Strategy