Exam 6: Corporate-Level Strategy

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:

Revenues for United Parcel Service (UPS) come from the following business segments: 60 percent from U.S. package delivery operations, 22 percent from international package delivery, and 18 percent from non-packaging operations. Which best describes the corporate level strategy of UPS?

Large diversified businesses often face what is known as the "conglomerate discount." This discount means that investors:

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

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.

Revenues for United Parcel Service (UPS) are derived from the following business segments: 60 percent from U.S. package delivery operations, 22 percent from international package delivery, and 18 percent from non-packaging operations. The best description of the corporate level strategy of UPS is unrelated diversification.

Corporate-level strategies are strategies a firm uses to diversify its operations from a single business competing in a single market into several product markets and, most commonly, into several businesses.

When firms share activities across units, they are often able to achieve increased value.

Large diversified businesses often face a _______________, which results from analysts not knowing how to value a vast array of large businesses with complex financial reports.

Describe the primary reasons a firm pursues increased diversification.

The _________________diversification strategy creates value in two ways. First, because the core competency has already been developed in one business, the firm does not have to allocate resources to develop it. Second, because the resource is intangible, competitors cannot easily imitate it.

Low firm performance is associated with increased diversification.

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

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

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

In the Chapter 6 Opening Case, Disney achieved growth and diversification through mergers and acquisitions.

Companies creating financial economies through restructuring typically focus on high-technology businesses primarily because these firms are dependent on human-resources.

Which of the following is NOT a governance mechanism that may limit managerial tendencies to over-diversify?

Knowing that their firms could be acquired if they are not managed successfully encourages executives to use value-creating diversification strategies.

If managers diversify a firm in a way that does not produce value, the firm risks capital market intervention.