Exam 6: Corporate-Level Strategy

Different incentives to diversify sometimes exist, and the quality of a firm's resources may permit only diversification that is value neutral rather than value creating.

Equator, a U.S. manufacturer of pharmaceuticals, 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.

The Walt Disney Company has successfully used related diversification to create value by:

The purchasing of firms in the same industry is called:

The lowest level of diversification is the ____ level.

In a money-making effort, a small private university has decided to institute consulting services using its business faculty as consultants whose services would be sold to clients. This university is attempting to use its faculty to gain economies of scope.

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

Firms seeking to create value through corporate relatedness use the related constrained strategy.

When diversification results in two companies, such as UPS and FedEx, simultaneously competing in the same product areas or geographic markets, this is called ____ competition.

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

One method of facilitating the transfer of competencies between firms is to:

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.

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

In a diversified firm, capital allocation can be adjusted according to more specific criteria than is possible with external market allocation of capital.

Market power exists when a firm is able to sell its products above the existing competitive level or decrease the costs of its primary and support activities below the competitive level, or both.

The downside of synergy in a diversified firm is:

The main difference between the related constrained level of diversification and the related linked level of diversification is:

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

A significant benefit of an internal capital market is that corporate headquarters has access to detailed and accurate information regarding the performance of the company's portfolio and can thus make better capital allocation decisions.

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.