Question 1

If, when Peach Computers introduced its PeachPit in 2001, the company used its profits in the computer industry to subsidize its operations in the electronics industry and used this subsidy to sell the PeachPit for a price that was less than the cost of producing and selling the MP3 players, this would be an example of

Accepted Answer

A)   mutual forbearance.
B)   escalation of commitment.
C)   predatory pricing.
D)   multipoint competition.E) B) and C)
F) None of the above

Question 2

Diversified firms that are exploiting core competencies as an economy of scope but are not doing so with any shared activities are sometimes called ________ diversified firms.

Accepted Answer

A)   seemingly related
B)   unrelated
C)   semi-related
D)   link-relatedE) B) and C)
F) A) and B)

Question 3

Over the last decade, more and more diversified firms have been abandoning efforts at managing each business's activities independently in favor of increased activity sharing.

Accepted Answer

A) True 
 B)False

Question 4

Both shared activities and internal capital allocation are examples of economies of scope that have the potential for generating positive returns for a firm's equity holders.

Accepted Answer

A) True 
 B)False  True

Question 5

Firms pursuing ________ have between 70% and 95% of their sales in a single product market.

Accepted Answer

A)   dominant-business diversification
B)   single-business diversification
C)   related-constrained diversification
D)   related-linked diversificationE) A) and B)
F) A) and C)

Question 6

Define the concept of economies of scope, discuss when they are valuable and identify and differentiate between four of the eight potential economies of scope a diversified firm might try to exploit.

Accepted Answer

Economies of scope exist in a firm when ...

Question 7

Identify and distinguish between the five different levels of diversification discussed in Chapter 7.

Accepted Answer

The five different levels of diversification that firms can pursue:
Single-business firms - These firms operate in a single business and 95% or more of firm revenues come from this business.
Dominant-business diversification - Firms using this type of limited diversification strategy operate in two or more businesses, one of which accounts for between 70% and 90% of firm revenues.
Related-constrained diversification - A firm using this type of related diversification operates in multiple businesses, none of which accounts for more that 70% of firm revenues that share a significant number of dimensions including inputs, production technologies, distribution channels, similar customers, etc. This strategy is termed "constrained" because corporate managers pursue business opportunities in new markets or industries only if those markets or industries share numerous resource and capability requirements with the businesses the firm is currently pursuing.
Related-linked diversification - Firms using this type of related diversification operate in multiple businesses, none of which accounts for more than 70% of a firm's revenues, and these businesses share only a couple of dimensions or have businesses that are linked along very different dimensions.
Unrelated corporate diversification - When less than 70 percent of a firm's revenues is generated in a single product market and when a firm's businesses share few, if any, common attributes, then that firm is pursuing a strategy of unrelated corporate diversification.

Question 8

In order for corporate diversification to be economically valuable

Accepted Answer

A)   there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be more costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
B)   there must not be any valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
C)   there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
D)   there must not be any valuable economy of scope among the multiple businesses in which a firm is operating and it must be more costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.E) A) and D)
F) B) and C)

Question 9

A firm has implemented a strategy of ________ when all or most of its activities fall within a single industry and geographic market.

Accepted Answer

A)   limited corporate diversification
B)   related diversification
C)   unrelated diversification
D)   related-linked diversificationE) B) and D)
F) A) and B) A

Question 10

A firm that diversifies by exploiting its resources and capability advantages in its original business will have ________ costs than (as)  firms that begin a new business without these resource and capability advantages, or ________ revenues than (as)  firms lacking these advantages.

Accepted Answer

A)   higher; lower
B)   the same; higher
C)   lower; the same
D)   lower; higherE) A) and B)
F) A) and C)

Question 11

Identify which economies of scope are more likely to be subject to low-cost imitation and which are less likely to be subject to low-cost imitation and discuss why each is either costly or less costly to duplicate.

Accepted Answer

The extent to which a valuable and rare ...

Question 12

Compared to two very risky businesses that have cash flows that are not highly correlated over time and that are operating separately, the risk of a diversified firm operating in those same two businesses simultaneously is

Accepted Answer

A)   somewhat higher.
B)   lower.
C)   the same.
D)   substantially higher.E) C) and D)
F) B) and D)

Question 13

Firms such as Disney that own and operate businesses that share a limited number of inputs, production technologies or distribution channels are said to be pursuing a ________ corporate diversification strategy.

Accepted Answer

A)   related-constrained
B)   related-linked
C)   dominant-business
D)   single-businessE) B) and C)
F) A) and C)

Question 14

A common way of thinking about strategy across different businesses within a firm is known as the firm's

Accepted Answer

A)   core competency.
B)   competitive advantage.
C)   economy of scope.
D)   dominant logic.E) A) and B)
F) C) and D)

Question 15

The only economy of scope that an unrelated firm can try to realize is

Accepted Answer

A)   core competencies.
B)   tax advantages.
C)   multipoint competition.
D)   risk reduction.E) B) and D)
F) B) and C)

Question 16

The only two economies of scope that do not have the potential for generating positive returns for a firm's equity holders are diversification in order to maximize the size of a firm and diversification to reduce risk.

Accepted Answer

A) True 
 B)False

Question 17

A firm has implemented a strategy of limited corporate diversification when all or most of its business activities fall within a single industry and geographic market.

Accepted Answer

A) True 
 B)False

Question 18

If all the businesses in which a firm operates share a significant number of inputs, production technologies, distribution channels, similar customers, and so forth, this corporate diversification strategy is called related-constrained diversification.

Accepted Answer

A) True 
 B)False

Question 19

In general, as a source of capital a diversified firm has ________ information about a business that it owns compared to external sources of capital.

Accepted Answer

A)   more and better
B)   the same
C)   less and inferior
D)   more but biasedE) A) and B)
F) B) and C)

Question 20

________ is an example of a less costly-to-duplicate economies of scope.

Accepted Answer

A)   Tax advantages
B)   Core competencies
C)   Internal capital allocation
D)   Multipoint competitionE) None of the above
F) A) and C)

Exam 7: Corporate Diversification

Correct Answer
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Diversified firms that are exploiting core competencies as an economy of scope but are not doing so with any shared activities are sometimes called ________ diversified firms.

Correct Answer
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Over the last decade, more and more diversified firms have been abandoning efforts at managing each business's activities independently in favor of increased activity sharing.

Correct Answer
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Both shared activities and internal capital allocation are examples of economies of scope that have the potential for generating positive returns for a firm's equity holders.

Correct Answer
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True

Firms pursuing ________ have between 70% and 95% of their sales in a single product market.

Correct Answer
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Define the concept of economies of scope, discuss when they are valuable and identify and differentiate between four of the eight potential economies of scope a diversified firm might try to exploit.

Correct Answer
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Economies of scope exist in a firm when ...
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Identify and distinguish between the five different levels of diversification discussed in Chapter 7.

In order for corporate diversification to be economically valuable

Correct Answer
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A firm has implemented a strategy of ________ when all or most of its activities fall within a single industry and geographic market.

Correct Answer
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A

A firm that diversifies by exploiting its resources and capability advantages in its original business will have costs than (as) firms that begin a new business without these resource and capability advantages, or revenues than (as) firms lacking these advantages.

Correct Answer
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Identify which economies of scope are more likely to be subject to low-cost imitation and which are less likely to be subject to low-cost imitation and discuss why each is either costly or less costly to duplicate.

Correct Answer
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The extent to which a valuable and rare ...
View Answer

Compared to two very risky businesses that have cash flows that are not highly correlated over time and that are operating separately, the risk of a diversified firm operating in those same two businesses simultaneously is

Correct Answer
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Firms such as Disney that own and operate businesses that share a limited number of inputs, production technologies or distribution channels are said to be pursuing a ________ corporate diversification strategy.

Correct Answer
verified

A common way of thinking about strategy across different businesses within a firm is known as the firm's

Correct Answer
verified

The only economy of scope that an unrelated firm can try to realize is

Correct Answer
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The only two economies of scope that do not have the potential for generating positive returns for a firm's equity holders are diversification in order to maximize the size of a firm and diversification to reduce risk.

Correct Answer
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A firm has implemented a strategy of limited corporate diversification when all or most of its business activities fall within a single industry and geographic market.

Correct Answer
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If all the businesses in which a firm operates share a significant number of inputs, production technologies, distribution channels, similar customers, and so forth, this corporate diversification strategy is called related-constrained diversification.

Correct Answer
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In general, as a source of capital a diversified firm has ________ information about a business that it owns compared to external sources of capital.

Correct Answer
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________ is an example of a less costly-to-duplicate economies of scope.

Correct Answer
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Exam 7: Corporate Diversification

Correct AnswerverifiedShow Answer

Diversified firms that are exploiting core competencies as an economy of scope but are not doing so with any shared activities are sometimes called ________ diversified firms.

Correct AnswerverifiedShow Answer

Over the last decade, more and more diversified firms have been abandoning efforts at managing each business's activities independently in favor of increased activity sharing.

Correct AnswerverifiedShow Answer

Both shared activities and internal capital allocation are examples of economies of scope that have the potential for generating positive returns for a firm's equity holders.

Correct AnswerverifiedTrue

Firms pursuing ________ have between 70% and 95% of their sales in a single product market.

Correct AnswerverifiedShow Answer

Define the concept of economies of scope, discuss when they are valuable and identify and differentiate between four of the eight potential economies of scope a diversified firm might try to exploit.

Correct AnswerverifiedEconomies of scope exist in a firm when ...View AnswerShow Answer

Identify and distinguish between the five different levels of diversification discussed in Chapter 7.

In order for corporate diversification to be economically valuable

Correct AnswerverifiedShow Answer

A firm has implemented a strategy of ________ when all or most of its activities fall within a single industry and geographic market.

Correct AnswerverifiedA

A firm that diversifies by exploiting its resources and capability advantages in its original business will have ________ costs than (as) firms that begin a new business without these resource and capability advantages, or ________ revenues than (as) firms lacking these advantages.

Correct AnswerverifiedShow Answer

Identify which economies of scope are more likely to be subject to low-cost imitation and which are less likely to be subject to low-cost imitation and discuss why each is either costly or less costly to duplicate.

Correct AnswerverifiedThe extent to which a valuable and rare ...View AnswerShow Answer

Compared to two very risky businesses that have cash flows that are not highly correlated over time and that are operating separately, the risk of a diversified firm operating in those same two businesses simultaneously is

Correct AnswerverifiedShow Answer

Firms such as Disney that own and operate businesses that share a limited number of inputs, production technologies or distribution channels are said to be pursuing a ________ corporate diversification strategy.

Correct AnswerverifiedShow Answer

A common way of thinking about strategy across different businesses within a firm is known as the firm's

Correct AnswerverifiedShow Answer

The only economy of scope that an unrelated firm can try to realize is

Correct AnswerverifiedShow Answer

The only two economies of scope that do not have the potential for generating positive returns for a firm's equity holders are diversification in order to maximize the size of a firm and diversification to reduce risk.

Correct AnswerverifiedShow Answer

A firm has implemented a strategy of limited corporate diversification when all or most of its business activities fall within a single industry and geographic market.

Correct AnswerverifiedShow Answer

If all the businesses in which a firm operates share a significant number of inputs, production technologies, distribution channels, similar customers, and so forth, this corporate diversification strategy is called related-constrained diversification.

Correct AnswerverifiedShow Answer

In general, as a source of capital a diversified firm has ________ information about a business that it owns compared to external sources of capital.

Correct AnswerverifiedShow Answer

________ is an example of a less costly-to-duplicate economies of scope.

Correct AnswerverifiedShow Answer

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True

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Economies of scope exist in a firm when ...
View Answer

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A

A firm that diversifies by exploiting its resources and capability advantages in its original business will have costs than (as) firms that begin a new business without these resource and capability advantages, or revenues than (as) firms lacking these advantages.

Correct Answer
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The extent to which a valuable and rare ...
View Answer

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