Exam 6: Corporate-Level Strategy

An unrelated diversification strategy can create value through two types of financial economies: (1) efficient internal capital allocations and (2) purchasing other firms, restructuring their assets, and selling them.

Firms that have selected a related diversification corporate-level strategy seek to exploit:

Diversification strategies can be used with both value-creating and value-neutral objectives.

The curvilinear relationship of corporate performance and diversification indicates that:

During the 1990s, 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:

Hutchison Whampoa Limited (HWL) has businesses in ports and related services, telecommunications, property and hotels, retail and manufacturing, and energy and infrastructure.HWL makes no efforts to share activities or transfer core competencies among the businesses.HWL is following a strategy of __________ diversification.

Procter & Gamble (P&G) has a paper towel and baby diaper business, both of which use paper products.The firm's paper production plant produces inputs for both businesses.P&G MOST likely uses the __________ diversification strategy to create __________.

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

Activity sharing limits risk because the ties among a firm's businesses create links between outcomes.

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.

As the threat of corporate failure increases due to relatedness between a firm's business units, the firm may decide to:

The risk for firms that follow the unrelated diversification strategy in developed economies is that:

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.

A company that tries to balance both operational and corporate relatedness and fails risks incurring diseconomies of scope.

To ensure the quality of its almond butters, Rally's Roasters owns the almond groves in which all of its almonds are grown.Rally's almond butters are sold in supermarkets as well as specialty food stores throughout the country.Rally's makes use of what type of integration?

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:

Corporate-level strategy is concerned with __________ and how to manage these businesses.

Capricorn, a U.S.manufacturer of cleansers, has acquired a firm in the same industry in Ireland.It plans to move one of its key managers from its plant in St.Louis to Ireland.This can be considered a method of transferring corporate-level core competencies.

Firms that sold off related units in which resource sharing was a possible source of economies of scope have been found to produce lower returns than those that sold off businesses unrelated to the firm's core business.

The lowest level of diversification is the __________ level.