Accounting
Anthropology
Archaeology
Art History
Banking
Biology & Life Science
Business
Business Communication
Business Development
Business Ethics
Business Law
Chemistry
Communication
Computer Science
Counseling
Criminal Law
Curriculum & Instruction
Design
Earth Science
Economic
Education
Engineering
Finance
History & Theory
Humanities
Human Resource
International Business
Investments & Securities
Journalism
Law
Management
Marketing
Medicine
Medicine & Health Science
Nursing
Philosophy
Physic
Psychology
Real Estate
Science
Social Science
Sociology
Special Education
Speech
Visual Arts
Finance
Q:
Economic measures of divisional performance in a diversified firm compare a division's performance with a firm's cost of capital and these measures increase the potential for gaming, which is generally minimized by accounting measures.
Q:
Economic methods of divisional performance in a diversified firm build on accounting methods but adjust those methods to incorporate short-term investments that may generate long-term benefits.
Q:
Most accounting measures of divisional performance focus on long-term benefits and minimize the possibility of a short-term bias.
Q:
One of the strengths of using a hurdle rate to measure the performance of divisions in a diversified firm is that if the corporation has a single hurdle rate, there is little ambiguity about the performance objectives of divisions.
Q:
Only accounting measures of performance can be used in accurately measuring the performance of divisions within a diversified firm.
Q:
If institutional investors are biopic, they should influence firms to invest in relatively less R&D.
Q:
The senior executive in an M-form organization has two responsibilities: strategy formulation and strategy implementation.
Q:
In 1970, institutions owned 62 percent of the equity traded in the United States; by 1990, institutions owned 48 percent of this equity and by 2002, they owned only 32 percent of this equity.
Q:
Institutional owners are usually pension funds, mutual funds, insurance companies, or other groups of investors that have joined together to manage their investments.
Q:
Managerial risk aversion is not as important in diversified firms where risk is distributed.
Q:
A board of directors typically consists of 15 to 30 individuals drawn from a firm's top management group and from individuals outside the firm.
Q:
To the extent that a board of directors begins to operate a business on a day-to-day basis, it goes beyond its capabilities.
Q:
Research has shown that separating the roles of CEO and board chair is positively correlated with firm performance when firms operated in high-growth and very complex environments.
Q:
Research on outside members of boards of directors tends to show that outside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance.
Q:
In principle, only the CEO and the president report to the board of directors while other senior managers report only to the CEO.
Q:
In an M-form organization the role of the board of directors is to formulate corporate strategies consistent with equity holders' interests and to assure strategy implementation.
Q:
One common agency problem occurs when managers decide to take some of a firm's capital and invest it in managerial perquisites that do not add economic value to the firm but that do directly benefit those managers.
Q:
In an agency relationship the party delegating the decision-making authority is called the agent.
Q:
Whenever one party to an exchange delegates decision-making authority to a second party, an agency relationship has been created between these parties.
Q:
The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with the interests of its equity holders.
Q:
Each division in an M-form organization typically adopts a matrix structure and the division general manager takes on the role of senior project executive.
Q:
Divisions in an M-form organization should be large enough to represent identifiable business entities but small enough so that a division general manager can manage each one effectively.
Q:
All firms that use the multidivisional structure use the same criteria for defining the boundaries of profit-and-loss centers.
Q:
The divisions in an M-form organization are true profit-and-loss centers.
Q:
In the multidivisional structure, each business that the firm engages in is managed through a division.
Q:
Another name for the M-form is the multidivisional structure.
Q:
The most common organization structure for implementing a corporate diversification strategy is the U-form.
Q:
Explain how strategic alliances are a substitute for exploiting economies of scope in diversification.
Q:
Identify two potential substitutes for corporate diversification and discuss how each can provide benefits similar to corporate diversification.
Q:
Identify which economies of scope are more likely to be subject to low-cost imitation and which are less likely to be subject to low-cost imitation and discuss why each is either costly or less costly to duplicate.
Q:
Discuss the conditions under which a firm's diversification strategy will be rare.
Q:
Identify and discuss the two economies of scope that do not have the potential for generating positive returns for a firm's outside equity investors.
Q:
Discuss shared activities as a potential source of economies of scope for diversified firms and identify the potential benefits and limits of activity sharing.
Q:
Define the concept of economies of scope, discuss when they are valuable and identify and differentiate between four of the eight potential economies of scope a diversified firm might try to exploit.
Q:
Specify the two conditions that a corporate diversification strategy must meet in order to create economic value.
Q:
Identify and distinguish between the five different levels of diversification discussed in Chapter 7.
Q:
Discuss when a firm is implementing a corporate diversification strategy and differentiate between a product diversification strategy, a geographic market diversification strategy and a product-market diversification strategy.
Q:
At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 96% of its revenue from the sales of computers and computer-related software and approximately 4% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues.
If Peach Computers were looking to getting into the business of making telephones, its diversification would be called
A) related-linked.
B) related-constrained.
C) related-corporate.
D) unrelated.
Q:
At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 96% of its revenue from the sales of computers and computer-related software and approximately 4% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues.
In 2001, if Peach Computers did not want to employ a diversification strategy to enter the personal electronics industry, it could use which substitute for diversification?
A) backward vertical integration
B) product differentiation
C) strategic alliances
D) forward vertical integration
Q:
At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 96% of its revenue from the sales of computers and computer-related software and approximately 4% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues.
If no other firm in the computer industry were using a diversification strategy similar to Peach Computers', this diversification strategy could be said to be
A) rare and costly to duplicate.
B) rare and less costly to duplicate.
C) common but costly to duplicate.
D) common and less costly to duplicate.
Q:
At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 96% of its revenue from the sales of computers and computer-related software and approximately 4% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues.
Peach Computers' equity holders, its employees, suppliers and customers along with all of those groups and individuals who have an interest in how Peach Computers performs are referred to as
A) focal groups.
B) stakeholders.
C) supporters.
D) stockholders.
Q:
At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 96% of its revenue from the sales of computers and computer-related software and approximately 4% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues.
If, when Peach Computers introduced its PeachPit in 2001, the company used its profits in the computer industry to subsidize its operations in the electronics industry and used this subsidy to sell the PeachPit for a price that was less than the cost of producing and selling the MP3 players, this would be an example of
A) mutual forbearance.
B) escalation of commitment.
C) predatory pricing.
D) multipoint competition.
Q:
At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 96% of its revenue from the sales of computers and computer-related software and approximately 4% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues.
If one of the reasons that Peach Computers entered into the electronics industry was to offset weakness in the computer industry because when the computer industry was weak, the electronics industry was strong, and vice versa, Peach Computers would be pursuing which economy of scope?
A) core competencies
B) multipoint competition
C) tax advantages
D) risk reduction
Q:
At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 96% of its revenue from the sales of computers and computer-related software and approximately 4% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues.
One of the limits of the economies of scope that Peach Computers is leveraging in its diversification strategy is
A) they may limit the ability of a particular business to meet specific customers' needs.
B) they are significantly affected by the way a diversified firm is organized.
C) they are not tangible and may be reflected only in the shared knowledge, experience and wisdom across businesses.
D) the level and type of diversification that a firm pursues can affect the efficiency of this allocation process.
Q:
At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 96% of its revenue from the sales of computers and computer-related software and approximately 4% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues.
Which type of economies of scope is Peach Computers experiencing between its units?
A) shared activities
B) core competencies
C) multipoint competition
D) tax advantages
Q:
At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 96% of its revenue from the sales of computers and computer-related software and approximately 4% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues.
By 2003, Peach Computers' diversification strategy was best characterized as
A) unrelated diversification.
B) related-constrained diversification.
C) related-linked diversification.
D) dominant-business diversification.
Q:
At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 96% of its revenue from the sales of computers and computer-related software and approximately 4% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues.
In 2001, Peach Computers' diversification strategy was best characterized as
A) related-linked diversification.
B) dominant-business diversification.
C) single-business diversification.
D) related-constrained diversification.
Q:
________ are substitutes for exploiting economies of scope in diversification.
A) Tax havens
B) Tax shelters
C) Tax freedom
D) Strategic alliances
Q:
________ is an example of a less costly-to-duplicate economies of scope.
A) Tax advantages
B) Core competencies
C) Internal capital allocation
D) Multipoint competition
Q:
Which of the following economies of scope is costly-to-duplicate?
A) employee compensation
B) core competencies
C) shared activities
D) risk reduction
Q:
Which of the following statements regarding the rarity of diversification is accurate?
A) If only a few competing firms have exploited a particular economy of scope, that economy of scope can be rare.
B) A particular economy of scope can only be rare if no other firms are exploiting that economy of scope.
C) A particular economy of scope can be rare even if many other firms are exploiting that economy of scope.
D) If only a few competing firms have exploited a particular economy of scope, that economy of scope can be rare but only if the firm is pursuing unrelated diversification.
Q:
Substitutes for exploiting economies of scope in diversification include
A) growing and developing independent businesses within a diversified firm and vertical integration.
B) vertical integration and strategic alliances.
C) growing and developing independent businesses within a diversified firm and strategic alliances.
D) strategic alliances and multipoint competition.
Q:
Which of the following economies of scope is less costly to duplicate?
A) employee compensation
B) core competencies
C) multipoint competition
D) exploiting market power
Q:
Which of the following economies of scope is costly to duplicate?
A) shared activities
B) internal capital allocation
C) risk reduction
D) tax advantages
Q:
The only economy of scope that an unrelated firm can try to realize is
A) core competencies.
B) tax advantages.
C) multipoint competition.
D) risk reduction.
Q:
Which of the following economies of scope do not have the potential for generating positive returns for a firm's equity holders since the economies of scope can be realized by outside equity holders at a low cost by investing in a diversified portfolio of stock?
A) shared activities
B) diversification to maximize the size of a firm
C) internal capital allocation
D) exploiting market power
Q:
Research over the years has demonstrated conclusively that the primary determinant of the compensation of top managers in a firm is
A) not the size of the firm, usually measured in sales, but the economic performance of the firm.
B) both the economic performance of the firm as well as the size of the firm, usually measured in sales.
C) not the economic performance of the firm but the size of the firm, usually measured in sales.
D) neither the economic performance of the firm nor the size of the firm.
Q:
When diversified firms use the revenues from profitable businesses to subsidize the operations of another business and then set the prices of the subsidized firm's products at a level that is below the subsidized business's cost to produce these items, this is known as ________ pricing.
A) dynamic
B) monopoly
C) predatory
D) beneficial
Q:
For multipoint competition to lead to mutual forbearance,
A) the threat of retaliation must be substantial and the firms pursuing this strategy must have strong linkages among their diversified businesses.
B) the threat of retaliation must be low and the firms pursuing this strategy must have strong linkages among their diversified businesses.
C) the threat of retaliation must be low and the firms pursuing this strategy must have weak linkages among their diversified businesses.
D) the threat of retaliation must be substantial and the firms pursuing this strategy must have weak linkages among their diversified businesses.
Q:
________ exists when two or more diversified firms simultaneously compete in multiple markets.
A) Multipoint competition
B) Dynamic competition
C) Multipoint cooperation
D) Dynamic cooperation
Q:
Compared to two very risky businesses that have cash flows that are not highly correlated over time and that are operating separately, the risk of a diversified firm operating in those same two businesses simultaneously is
A) somewhat higher.
B) lower.
C) the same.
D) substantially higher.
Q:
In general, as a source of capital a diversified firm has ________ information about a business that it owns compared to external sources of capital.
A) more and better
B) the same
C) less and inferior
D) more but biased
Q:
A common way of thinking about strategy across different businesses within a firm is known as the firm's
A) core competency.
B) competitive advantage.
C) economy of scope.
D) dominant logic.
Q:
Diversified firms that are exploiting core competencies as an economy of scope but are not doing so with any shared activities are sometimes called ________ diversified firms.
A) seemingly unrelated
B) unrelated
C) semi-related
D) link-related
Q:
If all of a firm's businesses share the same core competencies, then that firm has implemented a strategy of ________ diversification.
A) single-business
B) related-linked
C) related-constrained
D) dominant-business
Q:
A firm that diversifies by exploiting its resources and capability advantages in its original business will have ________ costs than (as) firms that begin a new business without these resource and capability advantages, or ________ revenues than (as) firms lacking these advantages.
A) higher; lower
B) the same; higher
C) lower; the same
D) lower; higher
Q:
________ are complex sets of resources and capabilities that link different businesses in a diversified firm through managerial and technical know-how, experience and wisdom.
A) Managerial competencies
B) Core competencies
C) Competitive advantages
D) Core advantages
Q:
Limits of activity sharing include
A) substantial organizational issues that are often associated with a diversified firm's learning how to manage cross-business relationships and in which failure can lead to excess bureaucracy, inefficiency, and organizational gridlock.
B) a significant reduction in an organization's innovation and flexibility.
C) substantial organizational issues related to adequately compensating personnel across businesses and setting transfer prices.
D) a significant reduction in an organization's ability to meet the needs of any of its customers.
Q:
Shared activities are quite common between both ________ and ________ diversified firms.
A) single-business; dominant-business
B) related-constrained; single-business
C) related-linked; dominant-business
D) related-constrained; related-linked
Q:
If a diversified firm had three businesses and these companies shared a common marketing and service operation, as well as common technology and development, this would be an example of which type of economy of scope?
A) core competencies
B) shared activities
C) risk reduction
D) multipoint competition
Q:
Which type of economies of scope includes shared activities and core competencies?
A) operational economies of scope
B) financial economies of scope
C) anticompetitive economies of scope
D) employee and stakeholder incentives for diversification
Q:
Currently, most scholars believe that exploiting economies of scope through corporate diversification, on average,
A) destroyed about 25% of a firm's market value.
B) had no impact on a firm's market value.
C) destroyed about 55% of a firm's market value.
D) increased a firm's market value.
Q:
Which of the following statements regarding economies of scope is accurate?
A) Only firms pursuing single-business diversification can exploit economies of scope.
B) Only firms pursuing related-constrained diversification can exploit economies of scope.
C) Only firms not pursuing diversification can exploit economies of scope.
D) Only diversified firms can exploit economies of scope.
Q:
When the value of the products or services a firm sells increases as a function of the number of business that the firm operates in, ________ are said to exist.
A) economies of scope
B) vertical economies
C) economies of scale
D) diseconomies of scope
Q:
In order for corporate diversification to be economically valuable
A) there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be more costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
B) there must not be any valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
C) there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
D) there must not be any valuable economy of scope among the multiple businesses in which a firm is operating and it must be more costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
Q:
Firms such as General Electric that generate less than 70% of their revenues from a single product market and whose businesses share few, if any, common attributes are said to be pursuing ________ corporate diversification.
A) limited
B) related-linked
C) related-constrained
D) unrelated
Q:
Firms such as Disney that own and operate businesses that share a limited number of inputs, production technologies or distribution channels are said to be pursuing a ________ corporate diversification strategy.
A) related-constrained
B) related-linked
C) dominant-business
D) single-business
Q:
Firms such as PepsiCo that operate a number of businesses around the world that share a number of inputs, production technologies, or distribution channels but none of whose businesses account for more than 70% of a firm's revenues are said to be implementing a
A) related-constrained diversification.
B) related-linked diversification.
C) dominant-business diversification.
D) single-business diversification.
Q:
The analysis of firms pursuing a strategy of ________ is logically equivalent to the analysis of business-level strategies.
A) unrelated diversification
B) related-linked diversification
C) related-constrained diversification
D) limited corporate diversification
Q:
Firms pursuing ________ have between 70% and 95% of their sales in a single product market.
A) dominant-business diversification
B) single-business diversification
C) related-constrained diversification
D) related-linked diversification