In 2005, P&G, whose products include Crest toothpaste and Tide laundry detergent, purchased Gillette. Gillette itself has multiple businesses, including a range of products including electric toothbrushes, razors and batteries. Which of the following reflects the acquisition? Show C - It is related diversification for P&G because the product lines for both firms are consumer products sold through similar channels. Brinker International operates restaurants in several different segments of the casual dining market. Their brands include Chili's Grill & Bar, Romano's Macaroni Grill, and On the Border. Brinker's corporate level strategy is best described as: B - an example of product diversification On the most basic level, corporate-level strategy is concerned with_____ and how to manage these businesses. B - what product markets and businesses the firm should be in. The ultimate test of the value of a corporate-level strategy is whether the... C - businesses in the portfolio are worth more under the management of the company in question than they would be under any other ownership. The more "constrained" the relatedness of diversification, ..... C - the more links there are among the businesses owned by an organization Wm. Wrigley Jr. Company once made only chewing gum. When Wrigley bought Life Savers (a line of candy mints) and Altoids (a line of breadth mints) from Kraft, chewing gum then constituted less than 95% of revenues. Thus, Wrigley ... A - was moving away from its traditional single-business strategy toward a dominant strategy. Usually a company is classified as a single business firm when revenues generated by the dominant business are greater than _____ percent. The more direst connections among businesses, the more ____ is the relatedness of the diversification. A firm that earns less than 70% of revenue from its dominant business and has direct connections between its businesses is engaging in _____ diversification. Revenues for United Parcel Service (UPS) come from the following business segments: 74% from U.S. package delivery operations, 17% from international package delivery, and 9% from non-packaging operations. Which best describes the corporate level strategy of UPS? Which acquisition would be considered the LEAST related? -a candy manufacturer purchases a chemical laboratory specializing in food flavorings. -a chain of garden centers acquires a landscape architecture firm. -a hospital acquires a long-term care nursing home -an upscale "white-tablecloth" restaurant chain acquires a travel agency. D - upscale "white-tablecloth" restaurant chain acquires a travel agency The lowest level of diversification is the_____ level. The main difference between the related constrained level of diversification and the related linked level of diversification is.... B - the level of resources and activities shared among the businesses. The term "conglomerates" refers to firms using the ____ diversification strategy. GE has recently reorganized from eleven businesses down to six core businesses. The purpose of this reorganization is to transfer core competencies in different types of technologies among GE's businesses. This is an example of: D - increasing corporate relatedness. Which of the following reasons for diversification is most likely to increase the firm's value? B - reducing costs through business restructuring Which of the following is a value-reducing reason for diversification? B - expanding the business portfolio in order to reduce managerial employment risk. An office management firm has developed a system for efficiently organizing small medical and dental practices both through proprietary software and through unique training programs for staff. It has recently acquired a firm specializing in providing management services for veterinary practices. The office management firm is hoping to ........ A - achieve economies of scope. Firms that have selected a related diversification corporate-level strategy seek to exploit ........ B - economies of scope between business units. Firms seek to create value from economies of scope through all of the following EXCEPT: The basic types of operational economies through which firms seek value from economies of scope are: C - the sharing of primary and support activities Operational relatedness is created by ___ activities within the ___. B - sharing ; value chain The acquisition of Gillette Co. by Procter & Gamble will probably result in activity sharing because P&G has a reputation for technology transfer: the ability to take technology used in one brand and apply it to another brand. This is an example of: A - operational relatedness Which of following is TRUE? - Conglomerates no longer exist in the U.S. business scene, but are common in emerging markets. - Unrelated diversified firms seek to create value through economies of scope. - The sharing of intangible resources, such as know-how, between firms is a type of operational sharing in related diversifications. - Related linked firms share more tangible resources and activities between business than do related constrained firms. D - related linked firms share more tangible resources and activities between businesses than do related constrained firms. Research has shown that horizontal acquisitions .... D - are able to use activity sharing to successfully create economies of scope. A noted professional art academy has founded an “artists and friends” travel company specializing in tours for artists to scenic locales, using its faculty as traveling teachers. In addition, the art academy has purchased a framing company to both make frames for academy art works, but also to sell museum-quality framing services to the public. The art academy is engaging in diversification based on ____ relatedness. Dragonfly Publishers of children’s books has purchased White Rabbit, another publisher of children’s books. Both companies’ books are sold to the same retail stores and schools. Their content is different, since Dragonfly produces children’s literature, whereas White Rabbit focuses on child-level scientific and nature topics. Which of the following statements is probably TRUE about this acquisition? A - this is a horizontal acquisition. The purchasing of firms in the same industry is called: D - horizontal acquisition. In related linked diversified firms, ___ are a complex set of resources that link the different businesses through managerial and technological knowledge, experience, and expertise. A - corporate core competencies The drawbacks to transferring competencies by moving key people into new management positions include all EXCEPT: B - managerial competencies are not easily transferable to different organizational cultures. Multipoint competition occurs when... C -diversified firms compete against each other in several markets. One method of facilitating the transfer of competencies between firms is to B - transfer key people into new management positions Xanadu, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same industry in Ireland. It plans to transfer one of its key managers from its plant in St. Louis to Ireland. What is the major threat to Xanadu’s plan to transfer competencies from itself to the Irish firm? A - the St. Louis manager may quit Xanadu in order to remain in St. Louis. Acquisitions to increase market power require that the firm have a ___ diversification strategy. When diversification results in two companies, such as UPS and FedEx, simultaneously competing in numerous markets, this is called ____ competition. Cendant Corporation owns real estate brokerages, relocation services, lodging franchises and online travel services. It follows a ____ corporate strategy.
C - related linked diversification Historically, steel manufacturers in the U.S. have been involved in multiple facets of steel production. This was centered on the actual mill where steel was produced. Most large steel producers also owned the iron ore and coal mines, which are essential raw materials, and railroads needed to bring the raw materials to the mill and the finished goods to distribution centers. Steel manufactures were C - vertically integrated. Whirlpool and Maytag have similar product lines. By acquiring Maytag, Whirlpool sought to ... Backward integration occurs when a company A - produces its own inputs. PorkPride Foods produces hams and other meat products. It owns hog raising operations. This is an example of a ____ business. B - vertically integrated. A company pursuing vertical integration can gain market power over its competitors through all of the following EXCEPT A - improved process innovation. Which of the following is NOT a limit directly relating to vertical integration? D - imitation of core technology by potential competitors Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare and only two brick plants in the U.S. make this type of brick. Specialty Steel has decided to buy one of these brick plants. This is an example of Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare and only two brick plants in the U.S. make this type of brick. Specialty Steel owns one of these brick plants and buys all of its production. The other brick manufacturer has recently developed an inexpensive new technology whereby ordinary clay can be used to make this fire brick. This significantly reduces the production cost of this type of brick. A - specialty steel has less flexibility now than if it were not vertically integrated. The use of e-commerce to allow firms to reduce the costs of processing transactions while improving their supply-chain management skills and tightening the control of their inventories is beginning to replace Disney has been successful both in the sharing of activities among divisions and in the transfer of knowledge among divisions. Disney can be said to have created B - inimitable competencies The value of the assets of a firm using a diversification strategy to create both operational and corporate relatedness tend to be A - discounted by investors Firms are increasingly moving away from ___ integration and toward ___ integration. When a firm simultaneously practices operational relatedness and corporate relatedness, ...... A - it is difficult for investors to observe the value created by the firm. Which type of diversification is most likely to create value through financial economies? Luxottica is a sunglass manufacturer which has traditionally served the fashion segment. Luxottica recently purchased Oakley, Inc., a manufacturer of sunglasses in the sportswear segment. The potential synergies from this acquisition include C - both operational and corporate relatedness An ability to efficiently allocate capital through an internal market may help the firm protect the competitive advantages it develops A - through reduced disclosure to outside parties. A firm practicing unrelated diversification can make better capital allocations to its subsidiary businesses than the external capital market can for all the following reasons EXCEPT C - the firm can acquire other firms with innovative products instead of allocating capital to research and development. Stock markets apply a "conglomerate discount" of 20% on unrelated diversified firms. This means that investors B - believe that the value of conglomerates is 20% less than the value of the sum of their parts. Successful unrelated diversification through restructuring is typically accomplished by A - focusing on mature, low-technology businesses. The risk for firms that follow the unrelated diversification strategy in developed economies is that D - competition can imitate financial economies more easily than they imitate economies of scope.
What is the similarity between high-technology firms and service-based firms that makes them risky as restructuring candidates? A - they are human-resource dependent. Which of the following firms would be the most likely to be a successful candidate for acquisition and restructuring? C - a tire manufacturer established in 1910 External incentives to diversify include C - changes in antitrust regulations and tax laws. All of the following are internal firm incentives to diversify EXCEPT C - stricter interpretation of antitrust laws. The trend among conglomerates is to.... B - decrease their level of diversification Because of the tax laws of the 1960s and 1970s, when dividends were taxed more heavily than capital gains, shareholders preferred that corporations ..... B - keep free cash flows for investment in acquisitions. Free cash flows are ..... A - liquid financial assets for which investments in current businesses are no longer economically viable. Industry-specific deregulation has affected each of the following industries EXCEPT.... The curvilinear relationship of corporate performance and diversification indicates that .... B - the highest performing business strategy is related constrained diversification. As the threat of corporate failure increases due to relatedness between a firm;s business units, firms may decide to ..... B - diversify into less risky environments D - the value created by business units working together exceeds the value the units create when working independently. The downside of synergy in a diversified firm is ... D - the loss of flexibility The Cherrywood Fine Furniture Company finds itself with excess capacity in its plant and equipment for furniture manufacturing. This excess capacity will be useful in ... B - related diversification projects Intangible resources ..... B - are more flexible than tangible assets. Compared with diversification based on intangible resources, diversification based on financial resources is .... B - more imitable and less likely to create value on a long-term basis. Personal motives for managers to seek diversification include a desire to ... D - increase their compensation Isidore Crocker, CEO of Gotham Engines, is strongly in favor of acquiring Carolina Textiles, a firm in an unrelated industry. Some members of the board of directors are questioning Crocker’s motives for the acquisition. They argue that it is not uncommon for CEOs to push for acquisitions because C - higher CEO pay is related to larger organization size. During the 1990's top executives of Titanic, Inc., followed a pattern of aggressive acquisitions and diversification. Now, Titanic is performing poorly and earning below average returns. Lusitania, a large conglomerate firm, is in the final stages of purchasing Titanic. Lusitania has announced that it will fire Titanic’s current top executives. The Titanic executives may not be worried about their impending job loss if they B - have golden parachutes. Which of the following is NOT a governance mechanism that may limit managerial tendencies to over-diversify? C - surveillance technologies Which of a firm's resources is the most flexible and should have the strongest relationship to the extent of diversification? The trend in diversification is a (an) .... A - increase in related diversification. What is corporate level strategy diversification?Corporate-Level Strategies
A diversification strategy involves a decision at the corporate level to enter new businesses. These businesses may be related or completely unrelated to the corporation's existing business portfolio.
What company uses related diversification?One of the most famous companies in the world, Apple Inc. is perhaps the greatest example of a “related diversification” model. Related diversification means there are notable commonalities between the existing products and services, and the new ones being developed.
Why is corporate level strategy important to the diversified firm?Corporate-level strategies help companies to select new strategic positions — positions that are expected to increase the firm's value. Firms use corporate-level strategies as a means to grow revenues and profits, but there can be additional strategic intents to growth.
What are the 3 diversification strategies?There are three types of diversification techniques:. Concentric diversification. Concentric diversification involves adding similar products or services to the existing business. ... . Horizontal diversification. ... . Conglomerate diversification.. |
Firms that have selected a related diversification corporate level strategy seek to exploit
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