Exam 6: Corporate-Level Strategy

Describe the primary reasons a firm pursues increased diversification.

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.

The more links among businesses, the more __________ is the level of diversification.

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

Among the value-neutral incentives to diversify, some come from the firm's external environment while others are internal to the firm.External incentives to diversify include:

Which of the following reasons for diversification is MOST likely to increase the firm's value?

McIlhenny Company has focused on its family's hot sauce products for seven generations.Its recent partnership with other firms in order to put the Tabasco taste in a variety of food products reflects a new strategy of high-level diversification.

The term "conglomerates" refers to firms using the __________ diversification strategy.

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

In the 1960s and 1970s, capital gains were taxed more heavily than were dividends.

Market power is gained as the firm develops the ability to save on its operations, avoid sourcing and market costs, improve product quality, possibly protect its technology from imitation by rivals, and potentially exploit underlying capabilities in the marketplace.

Without strict governance mechanisms, the majority of executives will act in their own self-interest rather than acting as positive stewards of firm resources.