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Exam 6: Corporate-Level Strategy

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Question 71

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Firms using a related diversification strategy may gain market power when successfully using their related constrained or related linked strategy.

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Question 72

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Financial economies are cost savings realized through improved allocations of financial resources based on investments inside or outside the firm.

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Question 73

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

Walt Disney Company and Johnson & Johnson are examples of companies that have successfully used related diversification to create value by ________________.

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

The success of Oracle's related constrained strategy as discussed in the Strategic Focus has been limited by the difficulty of implementing sharing of activities across its major acquisitions.

In spite of the challenges associated with it, a number of firms continue to use the unrelated diversification strategy, especially in Europe and in emerging markets.

The lowest level of diversification is the ____ level.

Multipoint competition occurs when

Of the value-neutral incentives to diversify, all of the following are internal firm incentives EXCEPT

The more "constrained" the relatedness of diversification,

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.

Oracle has been diversifying in the software industry through acquisition of firms such as PeopleSoft as described in the Strategic Focus. There are very close linkages between Oracle and the various units and for the strategy to work, Oracle must develop mechanisms to share activities. Oracle is clearly following a _____________________diversification strategy.

The downside of synergy in a diversified firm is

Related diversification by a firm tends to reduce a manager's executive compensation, whereas unrelated diversification tends to increase it because the firm has moved into new industries.

Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare and only two brick plants in the U.S. make this type of brick. -Specialty Steel has decided to buy one of these brick plants. This is an example of

Which type of diversification is most likely to create value through financial economies?

PorkPride Foods produces hams and other meat products. It owns hog raising operations. This is an example of a ____ business.

Firms with both operational and corporate relatedness are favorites of investment analysts because the transparency and clarity of their financial statements clearly show the value-creation resulting from the combination of multiple businesses.

According to the chapter Opening Case about Foster's Group, the use of a single sales force to sell mass market and premium products was highly successful.