Exam 6: Corporate-Level Strategy

Which of the following types of diversification is MOST likely to create value through financial economies?

Research shows that increased firm size and greater levels of diversification are correlated with increased executive compensation.

Two ways that external parties can try to make changes to a firm are by forcing the firm into bankruptcy or changing the top management team.

S&E is a financial services firm with a reputation for its management ability.It has recently diversified into several additional service businesses without first acquiring an established brand-name business.This type of diversification strategy is known as what type of venture?

Ties among a firm's businesses create links between outcomes.This is a:

Wm.Wrigley Jr.Company once made only chewing gum.When Wrigley bought Life Savers (a line of candy mints) and Altoids (a line of breath mints) from Kraft, chewing gum then constituted less than 95 percent of revenues.Thus, Wrigley:

Many manufacturing firms are reducing vertical integration and moving to independent supplier networks.

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:

Dragonfly, publisher 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 because Dragonfly produces children's literature, whereas White Rabbit focuses on child-level nonfiction scientific and nature topics.Which of the following statements is probably true about this acquisition?

Which of the following firms would MOST likely be a successful candidate for acquisition and restructuring?

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

One advantage of an unrelated diversification strategy in a developed economy is that competitors cannot easily imitate the financial economies, whereas they can easily replicate the value gained through the use of a related diversification strategy.

What are the managerial motives to diversify, even if that diversification is value-reducing?

Google's diversification could lead the firm toward a related linked strategy and give the firm advantages in multipoint competition with competitors such as Facebook and Microsoft.

A company pursuing vertical integration can gain market power over its competitors through all of the following EXCEPT:

What is the effect of a firm's low performance on the pursuit of diversification?

Luxury Linens (LL) manufactures a line of luxury bed linens.LL's products can be purchased only through the company's web site.This ownership of output distribution is known as what type of integration?

The basic types of operational economies through which firms seek value from economies of scope are:

Vertical integration exists when a company produces its own inputs (backward integration) or owns its own source of output distribution (forward integration).

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