Clip ________ are substitutes for exploiting economies of scope in diversification. ?
Mẹo Hướng dẫn ________ are substitutes for exploiting economies of scope in diversification. Mới Nhất
Cao Thị Xuân Dung đang tìm kiếm từ khóa ________ are substitutes for exploiting economies of scope in diversification. được Cập Nhật vào lúc : 2022-12-14 07:45:10 . Với phương châm chia sẻ Kinh Nghiệm về trong nội dung bài viết một cách Chi Tiết 2022. Nếu sau khi tham khảo nội dung bài viết vẫn ko hiểu thì hoàn toàn có thể lại Comment ở cuối bài để Admin lý giải và hướng dẫn lại nha.A firm implements a corporate diversification strategy when it operates in multiple industries or markets simultaneously. True False Answer: True Page: 208 Difficulty: Easy Chapter Objective: 1 2.
Nội dung chính Show- Which of the following is a substitute for exploiting economies of scope in diversification?Which of the following economies of scope is costlyWhich one of the economies of scope is costlyWhich of the following forms of diversification occurs when a firm operates multiple?
When a firm operates in multiple industries simultaneously it is said to be implementing a geographic market diversification strategy. True False Answer: False Page: 208 Difficulty: Easy Chapter Objective: 1 3.
When a firm operates in multiple geographic markets simultaneously it is said to be implementing a product diversification strategy. True False Answer: False Page: 208 Difficulty: Easy Chapter Objective: 1 4.
A firm has implemented a strategy of limited corporate diversification when all or most of its business activities fall within a single industry and geographic market. True False Answer: True Page: 210 Difficulty: Easy Chapter Objective: 1 5.
The analysis of limited corporate diversification is logically equivalent to the analysis of business-level strategies. True False Answer: True Page: 211 Difficulty: Moderate Chapter Objective: 1 6.
A dominant-business firm is pursuing a related diversification strategy and has between 70 and 95 percent of firm revenues from a single business. True False Answer: False Page: 209 Difficulty: Moderate Chapter Objective: 1 7.
If all the businesses in which a firm operates share a significant number of inputs, production technologies, distribution channels, similar customers, and so forth, this corporate diversification strategy is called related-constrained diversification. True False Answer: True Page: 212 Difficulty: Moderate Chapter Objective: 1
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If the different businesses that a single firm pursues are linked on only a couple of dimensions, or if different sets of businesses are linked along very different dimensions, that corporate diversification strategy is called related-linked diversification. True False Answer: True Page: 212 Difficulty: Moderate Chapter Objective: 1 9.
When less than 90 percent of a firm's revenues are generated in a single product market, and when a firm's business share few, if any, common attributes, then that firm is pursuing a strategy of unrelated corporate diversification. True False Answer: False Page: 213 Difficulty: Hard Chapter Objective: 1 10. Economies of scope exist in a firm when the value of the products or services it sells increase as a function of the number of businesses in which the firm operates. True False Answer: True Page: 213 Difficulty: Moderate Chapter Objective: 3 11. In order for corporate diversification to be economically viable there must either be some valuable economy of scope among the multiple businesses in which a firm is operating or it must be less costly for managers in a firm to realize these economies of scope than for an outside equity holder on his or her own. True False Answer: False Page: 213 Difficulty: Moderate Chapter Objective: 2 12. Currently, most scholars believe that when a firm implements a corporate diversification strategy it destroys about 25% of its market value. True False Answer: False Page: 214 Difficulty: Hard Chapter Objective: 2 13. Operational economies of scope include shared activities and risk reduction. True False Answer: False Page: 215 Difficulty: Moderate Chapter Objective: 3
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14. Shared activities that can provide the basis for operational economies of scope are quite common among related-constrained and related-linked diversified firms, as well as firms following an unrelated diversification strategy. True False Answer: False Page: 216 Difficulty: Moderate Chapter Objective: 3 15. Shared activities can increase the revenues in diversified firms' businesses and failure to exploit shared activities across businesses can lead to out-of-control costs. True False Answer: True Page: 217 Difficulty: Moderate Chapter Objective: 3 16. One of the limits of activity sharing is that sharing activities may limit the ability of a particular business to meet its specific customers' needs. True False Answer: True Page: 218 Difficulty: Moderate Chapter Objective: 3 17. Over the last decade, more and more diversified firms have been abandoning efforts managing each business's activities independently in favor of increased activity sharing. True False Answer: False Page: 218 Difficulty: Hard Chapter Objective: 3 18. Core competencies are complex sets of resources and capabilities that link different businesses in a diversified firm through managerial and technical know-how, experience, and wisdom. True False Answer: True Page: 218 Difficulty: Moderate Chapter Objective: 3 19. A firm that diversifies by exploiting its resources and capability advantages in its original business will have higher costs than firms that begin new business without these revenues and capability advantages, or lower revenues than firms lacking these advantages, or both. True False Answer: False Page: 219 Difficulty: Hard Chapter Objective: 3
374 Part III 20. Firms that may appear to be unrelated diversified firms, but that are, in fact, related diversified firms without any shared activities are referred to as seemingly related firms. True False Answer: False Page: 221 Difficulty: Moderate Chapter Objective: 3 21. A firm's dominant logic is common way of thinking about strategy across different businesses. True False Answer: True Page: 222 Difficulty: Moderate Chapter Objective: 3 22. For an internal capital market to create value for a diversified firm, it must offer some efficiency advantages over an external capital market. True False Answer: True Page: 223 Difficulty: Moderate Chapter Objective: 3 23. The businesses within a diversified firm always gain cost-of-capital advantages by being part of a diversified firm's portfolio. True False Answer: False Page: 224 Difficulty: Easy Chapter Objective: 3 24. Multipoint competition exists when two or more diversified firms simultaneously compete in multiple markets and multipoint competition can serve to facilitate a particulate type of tacit collusion called mutual forbearance. True False Answer: True Page: 226 Difficulty: Moderate Chapter Objective: 3 25. Predatory pricing is a type of cross-subsidization in which a firm uses revenues from other businesses to set its prices in a particular business so that the prices are substantially more than the subsidized business's costs. True False Answer: False Page: 227 Difficulty: Moderate Chapter Objective: 3 26. Both shared activities and internal capital allocation are examples of economies of scope that have the potential for generating positive returns for a firm's equity holders. True False Answer: True Page: 230 Difficulty: Moderate Chapter Objective: 4
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27. Overall, related diversification is less likely to be consistent with the interests of a firm's equity holders than is unrelated diversification. True False Answer: False Page: 231 Difficulty: Moderate Chapter Objective: 4 28. The only two economies of scope that do not have the potential for generating positive returns for a firm's equity holders are diversification in order to maximize the size of a firm, and diversification to reduce risk. True False Answer: True Page: 230 Difficulty: Moderate Chapter Objective: 4 29. Diversification per se is usually not a rare firm strategy regardless of how rare the particular economies of scope associated with that diversification are. True False Answer: False Page: 231 Difficulty: Moderate Chapter Objective: 5 30. A firm's stakeholders include all of those groups or individuals who have an interest in how a firm performs. True False Answer: True Page: 232 Difficulty: Moderate Chapter Objective: 6 31. Core competencies and multipoint competition are usually costly-to-duplicate bases for corporate diversification. True False Answer: True Page: 231 Difficulty: Easy Chapter Objective: 6 32. Shared activities and risk reduction are usually difficult to duplicate bases for corporate diversification but tax advantages and employee compensation are usually relatively easy to duplicate. True False Answer: False Page: 233 Difficulty: Moderate Chapter Objective: 6 33. Strategic alliances are generally viewed as a poor substitute for diversification since the economies of scope in diversification can be found in strategic alliances. True False Answer: False Page: 234 Difficulty: Moderate Chapter Objective: 7
376 Part III 34. One substitute for diversification that exists is that instead of obtaining cost or revenue advantages from exploiting economies of scope across businesses in a diversified firm, a firm may decide to simple grow and develop each of its businesses separately. True False Answer: True Page: 234 Difficulty: Moderate Chapter Objective: 7 35. While currency fluctuations can significantly affect the value of a firm's international investments, it is now possible for firms to hedge most of these risks through the use of a variety of financial instruments and strategies. True False Answer: True Page: 235 Difficulty: Moderate Chapter Objective: 8 36. Firms can use international operations to avoid taxes by establishing operations in a country that charges little or no corporate tax, known as a tax haven. True False Answer: True Page: 236 Difficulty: Moderate Chapter Objective: 8 37. Government changes are virtually always bad for international firms, but the micro level, politics in a country can affect the fortunes of particular firms in particular industries in a positive way. True False Answer: False Page: 237 Difficulty: Moderate Chapter Objective: 8 38. Political scientists that have attempted to quantify the political risk that firms seeking to implement international strategies are likely to face in different countries have generally been unable to agree on a common set of criteria firms should use to evaluate the political and economic conditions in a country. True False Answer: False Page: 237 Difficulty: Hard Chapter Objective: 8 39. Regardless of how skilled a firm is in negotiating entry conditions, a change in government or changes in laws can quickly nullify any agreements. True False Answer: True Page: 238 Difficulty: Easy Chapter Objective: 8
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40. Similar to financial risks, there are a number of tools for managing political risks associated with pursuing an international strategy. True False Answer: False Page: 237 Difficulty: Moderate Chapter Objective: 8 MULTIPLE CHOICE QUESTIONS 41. A firm implements a _____________ when it operates in multiple industries or markets simultaneously. A. vertical integration strategy B. corporate diversification strategy C. business diversification strategy D. product differentiation strategy Answer: B Page: 208 Difficulty: Easy Chapter Objective: 1 42. When a firm operates in multiple industries simultaneously, it is said to be implementing a A. product diversification strategy. B. product differentiation strategy. C. geographic market diversification strategy. D. geographic market differentiation strategy. Answer: A Page: 208 Difficulty: Easy Chapter Objective: 1 43. When a firm operates in multiple geographic markets simultaneously it is said to be implementing a(n) A. international diversification strategy. B. product differentiation strategy. C. geographic market diversification strategy. D. geographic market differentiation strategy. Answer: C Page: 208 Difficulty: Moderate Chapter Objective: 1 44. When a firm implements both a product diversification strategy and a geographic market diversification strategy it is said to be implementing a(n) A. mixed-market diversification strategy. B. unrelated-diversification strategy. C. product differentiation strategy. D. product-market diversification strategy. Answer: D Page: 209 Difficulty: Moderate Chapter Objective: 1
378 Part III 45. A firm has implemented a strategy of _____________________ when all or most of its activities fall within a single industry and geographic market. A. limited corporate diversification B. related diversification C. unrelated diversification D. related-linked diversification Answer: A Page: 209 Difficulty: Moderate Chapter Objective: 1 46. In which type of limited corporate diversification do firms have greater than 95% of their total sales in a single product market? A. Dominant-business firms B. Single-business firms C. Related-constrained firms D. Related-linked firms Answer: B Page: 210 Difficulty: Moderate Chapter Objective: 1 47. 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 Answer: A Page: 210 Difficulty: Moderate Chapter Objective: 1 48. 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 Answer: D Page: 211 Difficulty: Moderate Chapter Objective: 1 49. Firms such as PepsiCo who 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. Answer: A Page: 212 Difficulty: Moderate Chapter Objective: 1
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50. Firms such as Disney which 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 Answer: B Page: 212 Difficulty: Moderate Chapter Objective: 1 51. 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 Answer: D Page: 213 Difficulty: Moderate Chapter Objective: 1 52. 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. Answer: C Page: 213 Difficulty: Moderate Chapter Objective: 2 53. 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 Answer: A Page: 213 Difficulty: Moderate Chapter Objective: 3
380 Part III 54. 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. Answer: D Page: 213 Difficulty: Moderate Chapter Objective: 3 55. Currently, most scholars believe that exploiting economies of scope through corporate diversification, on average, A. destroyed about 25% of the firm’s market value. B. had no impact on a firm’s market value. C. destroyed about 55% of the firm’s market value. D. increased a firm’s market value. Answer: D Page: 214 Difficulty: Hard Chapter Objective: 2 56. 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 Answer: A Page: 214 Difficulty: Easy Chapter Objective: 3 57. 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 Answer: B Page: 215 Difficulty: Moderate Chapter Objective: 3 58. Share 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 Answer: D Page: 216 Difficulty: Moderate Chapter Objective: 3
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59. Limits of activity sharing include A. substantial organizational issues are often associated with a diversified firm’s learning how to manage cross-business relationships and failure can lead to excess bureaucracy, inefficiency, and organizational gridlock. B. a significant reduction in the 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 the organization’s ability to meet the needs of any of its customers. Answer: A Page: 218 Difficulty: Hard Chapter Objective: 3 60. ___________ 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 Answer: B Page: 218 Difficulty: Moderate Chapter Objective: 3 61. 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 Answer: D Page: 219 Difficulty: Moderate Chapter Objective: 3 62. 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 Answer: C Page: 220 Difficulty: Hard Chapter Objective: 3 63. 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 related B. unrelated C. semi-related D. link-related Answer: A Page: 221 Difficulty: Moderate Chapter Objective: 3
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64. 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. Answer: D Page: 222 Difficulty: Moderate Chapter Objective: 3 65. In general, a diversified firm, as a source of capital 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 Answer: A Page: 223 Difficulty: Moderate Chapter Objective: 3 66. Compared to two very risk 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. Answer: B Page: 225 Difficulty: Moderate Chapter Objective: 3 67. ____________ exists when two or more diversified firms simultaneously compete in multiple markets. A. Multipoint competition B. Dynamic competition C. Multipoint cooperation D. Dynamic cooperation Answer: A Page: 226 Difficulty: Easy Chapter Objective: 3 68. 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. Answer: A Page: 227 Difficulty: Moderate Chapter Objective: 3
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69. When diversified firms use the revenues from profitable businesses to subsidize the operations of another business, and then set the prices of the subsidized firms products a level that is below the subsidized business's cost to produce these items, this known as ___________ pricing. A. dynamic B. monopoly C. predatory D. beneficial Answer: C Page: 227 Difficulty: Moderate Chapter Objective: 3 70. 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 or the size of the firm. Answer: C Page: 228 Difficulty: Moderate Chapter Objective: 3 71. 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 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 Answer: B Page: 230 Difficulty: Moderate Chapter Objective: 4 72. 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. Answer: D Page: 231 Difficulty: Moderate Chapter Objective: 4 73. Which of the following economies of scope is costly-to-duplicate? A. Shared activities B. Internal capital allocation C. Risk reduction D. Task advantages Answer: B Page: 232 Difficulty: Moderate Chapter Objective: 6
384 Part III 74. 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 Answer: A Page: 232 Difficulty: Moderate Chapter Objective: 6 75. 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. Answer: C Page: 234 Difficulty: Moderate Chapter Objective: 7 76. 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 only 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. Answer: A Page: 231 Difficulty: Moderate Chapter Objective: 5 77. Which of the following statements regarding financial risk and international diversification is accurate? A. Hedging strategies can help reduce both financial and political risks. B. Hedging strategies can help reduce political risks but not financial risks. C. Hedging strategies can help reduce financial risks but not political risks. D. Hedging strategies can't help reduce either financial or political risks. Answer: C Page: 235 Difficulty: Moderate Chapter Objective: 7 78. In terms of political risk which country is the least risky country within which to do business in the entire world? A. Switzerland B. Luxembourg C. Sweden D. the United States Answer: B Page: 237 Difficulty: Hard Chapter Objective: 7
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79. In terms of political risk which country is the most risky country within which to do business in the entire world? A. North Korea B. Iran C. Cuba D. Zaire Answer: A Page: 237 Difficulty: Hard Chapter Objective: 7 80. A country that charges little or no corporate tax is known as a A. tax liberty. B. tax shelter. C. tax freedom. D. tax haven. Answer: D Page: 236 Difficulty: Moderate Chapter Objective: 7 At the beginning of 2001 Peach Computers competed exclusively in the computer industry and generated approximately 95% of its revenue from the sales of computers and computer related software and approximately 5% of Peach's 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. 81. 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. Answer: C Page: 210 Difficulty: Moderate Chapter Objective: 1 82. By 2003, Peach Computer's diversification strategy was best characterized as A. unrelated diversification. B. related-constrained diversification. C. related-linked diversification. D. dominant-business diversification. Answer: B Page: 212 Difficulty: Moderate Chapter Objective: 1
386 Part III 83. Which type of economies of scope is Peach Computers experiencing between its units? A. Share activities B. Core competencies C. Multipoint competition D. Tax advantages Answer: A Page: 215 Difficulty: Hard Chapter Objective: 3 84. One of the limits of the economies of scope that Peach Computers is leveraging in its diversification strategy is that it A. may limit the ability of a particular business to meet specific customers' needs. B. is 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. Answer: A Page: 218 Difficulty: Hard Chapter Objective: 3 85. 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-a-versa, Peach Computers would be pursuing which economy of scope? A. Core competencies B. Multipoint competition C. Tax advantages D. Risk reduction Answer: D Page: 225 Difficulty: Moderate Chapter Objective: 3 86. 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. Answer: C Page: 227 Difficulty: Hard Chapter Objective: 3 87. 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. Answer: B Page: 232 Difficulty: Moderate Chapter Objective: 6
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88. If no other firm in the computer industry was 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. Answer: A Page: 231 Difficulty: Hard Chapter Objective: 5 89. In 2001, if Peach Computers did not want to employ a diversification strategy to enter the personal electronics industry, they could use which substitute for diversification? A. Backward vertical integration B. Product differentiation C. Strategic alliances D. Forward vertical integration Answer: C Page: 234 Difficulty: Moderate Chapter Objective: 7 90. If Peach Computers was seeking to further expand its international operations and wanted to avoid countries with a high political risk, it should consider all of the following countries for expansion except A. Luxembourg. B. Norway. C. Singapore. D. North Korea. Answer: D Page: 237 Difficulty: Moderate Chapter Objective: 8 ESSAY QUESTIONS 91. 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. A firm is implementing a corporate diversification strategy when it operates in multiple industries or markets simultaneously. A firm is said to be implementing a product diversification strategy when it operates in multiple industries simultaneously. A firm is said to be pursuing a geographic market diversification strategy when it operates in multiple geographic markets simultaneously. When a firm implements both a product diversification strategy and a geographic market diversification strategy simultaneously it is said to be producing a product-market diversification strategy. Pages: 208-209 Difficulty: Easy Chapter Objective: 1 92. Identify and distinguish between the five different levels of diversification discussed in Chapter 7. The five different levels of diversification that firms can pursue include Single-business firms – These firms operate in a single business and 95% or more of firm revenues come from this business.
388 Part III Dominant-business diversification – Firms using this type of limited diversification strategy operate in two or more businesses, one of which accounts for between 70% and 90% of firm revenues. Related-constrained diversification – A firm using this type of related diversification operates in multiple businesses, none of which accounts for more that 70% of firm revenues that share a significant number of dimensions including inputs, production technologies, distribution channels, similar customers, etc. This strategy is termed “constrained” because corporate managers pursue business opportunities in new markets or industries only if those markets or industries share numerous resource and capability requirements with the businesses the firm is currently pursuing. Related-linked diversification – Firms using this type of related diversification when it operates in multiple business, none of which accounts for more than 70% of a firms revenues, and these businesses share only a couple of dimensions, or have business that are linked along very different dimensions. Unrelated corporate diversification - When less than 70 percent of a firm’s revenues is generated in a single product market, and when a firm’s businesses share few, if any, common attributes, then that firm is pursuing a strategy of unrelated corporate diversification. Pages: 209-213 Difficulty: Moderate Chapter Objective: 1 93. Specify the two conditions that a corporate diversification strategy must meet in order to create economic value. In order for corporate diversification to be economically valuable, two conditions must hold. First, there must be some valuable economy of scope among the multiple businesses in which a firm is operating. Second, it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own. If outside investors could realize the value of a particular economy of scope on their own, and low cost, then they would have few incentives to “hire” managers to realize this economy of scope for them. Page: 213 Difficulty: Easy Chapter Objective: 2 94. 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. Economies of scope exist in a firm when the value of the products or services it sells increases as a function of the number of businesses that firm operates in. The term “scope” in this definition refers to the range of businesses in which a diversified firm operates. For this reason, only diversified firms can, by definition, exploit economies of scope. Economies of scope are valuable to the extent that they increase a firm’s revenues or decrease its costs, compared to what would be the case if these economies of scope were not exploited. There are eight different types of economies of scope including: Shared activities in which a firm's businesses share a variety of activities throughout their value chains can serve as the basis for operational economies of scope. Core competencies are complex sets of resources and capabilities that link different businesses in a diversified firm through managerial and technical know-how, experience, and wisdom.
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Internal capital allocation. In a sense, diversification creates an internal capital market in which businesses in a diversified firm compete for corporate capital. An internal capital market creates value for a diversified firm when it offers some efficiency advantages over an external capital market. Risk reduction. Diversified firms can achieve a lower level of risk if they build a business portfolio that has a low correlation between the cash flows of the businesses in the portfolio. Tax Advantages. A diversified firm can use losses in some of its businesses to offset profits in others, thereby reducing its overall tax liability. Second, because diversification can reduce the riskiness of a firm’s cash flows, it can also reduce the probability that a firm will declare bankruptcy. This can increase a firm’s debt capacity which is particularly important in tax environments where interest payments on debt are tax deductible. Multipoint competition is an anticompetitive economy of scope that exists when two or more diversified firms simultaneously compete in multiple markets. Multipoint competition can serve to facilitate a particular type of tacit collusion called mutual forbearance in which firms forgo acts competitive strategies in one business because of the possibility of retaliation by a competitor in another business. Exploiting market power. Internal allocations of capital among a diversified firm’s businesses may enable it to exploit in some of its businesses the market power advantages it enjoys in other of its businesses through actions such subsidizing the operations of another of its businesses. Maximizing management compensation managers seeking to maximize their income should attempt to grow their firm. One of the easiest ways to grow a firm is through diversification, especially unrelated diversification through mergers and acquisitions which can allow a diversified firm can grow substantially in a short period of time, leading senior managers to earn higher incomes. Pages: 215-228 Difficulty: Hard Chapter Objective: 3 95. Discuss shared activities as a potential source of economies of scope for diversified firms and identify the potential benefits and limits of activity sharing. When the companies in a diversified firm share a variety of activities throughout their value chains these activities can serve as the basis for operational economies of scope. Potential shared activities can be found throughout a firm's value chain from input activities through dealer support and service. Activity sharing can have the effect of reducing a diversified firm's costs and failure to exploit share activities across business can lead to out-of-control costs. Shared activities can also increase a diversified firm's businesses through shared product development and sales activities, as well as by enhancing business revenues by exploiting strong, positive reputations of some of a firm's businesses in other of its businesses. There are three important limits to activity sharing. First, substantial organizational issues can be associated with a diversified firm's learning how to manage cross-business relationships. Second, sharing activities may limit the ability of a particular business to meet its specific customer's needs. Finally, if one business in a diversified firm has a poor reputation, sharing activities with that business can reduce the quality of the reputation of other businesses in the firm. Pages: 215-218 Difficulty: Moderate Chapter Objective: 3
390 Part III 96. 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. The only two economies of scope that do not have the potential for generating positive returns for a firm's equity holders are diversification in order to maximize the size of a firm, and diversification to reduce risk. Diversification in order to maximize the size of a firm does not generate positive returns because firm size, per se, is not valuable. Diversification in order to reduce risk does not generate positive returns because equity holders can do this on their own a very low cost by simply investing in a diversified portfolio of stocks. Page: 230 Difficulty: Easy Chapter Objective: 4 97. Discuss the conditions under which a firm's diversification strategy will be rare. The rarity of diversification depends not on diversification per se but on how rare the particular economies of scope associated with that diversification are. If only a few competing firms have exploited a particular economy of scope, that economy of scope can be rare. If numerous firms have done so, it will be common and not a source of competitive advantage. Page: 231 Difficulty: Easy Chapter Objective: 5 98. 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. The extent to which a valuable and rare corporate diversification strategy is immune from direct duplication depends on how costly it is for competing firms to realize this same economy of scope. Some economies of scope are, in general, more costly to duplicate than others. Shared activities, risk reduction, tax advantages, and employee compensation as bases for corporate diversification are usually relatively easy to duplicate. Because shared activities are based on tangible assets that a firm exploits across multiple businesses, such as common R&D labs, common sales forces, and common manufacturing, they are usually relatively easy to duplicate. The only duplication issues for shared activities concern developing the cooperative cross-business relationships that often facilitate the use of shared activities—issues discussed in the next chapter. Moreover, because risk reduction, tax advantages, and employee compensation motives for diversifying can be accomplished through both related and unrelated diversification, these motives for diversifying tend to be relatively easy to duplicate. On the other hand, other economies of scope are much more difficult to duplicate. These difficult-to-duplicate economies of scope include core competencies, internal capital allocation efficiencies, multipoint competition, and exploitation of market power. Because core competencies are more intangible, their direct duplication is often challenging. The realization of capital allocation economies of scope requires very substantial informationprocessing capabilities. These capabilities are often very difficult to develop. Multipoint competition requires very close coordination between the different businesses in which a firm operates. This kind of coordination is socially complex and thus may often be immune from direct duplication. Finally, exploitation of market power may be costly to duplicate because it requires that a firm must possess significant market power in one of its lines of
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business. A firm that does not have this market power advantage would have to obtain it. The cost of doing so, in most situations, would be prohibitive. Pages: 231-234 Difficulty: Moderate Chapter Objective: 6 99. Identify two potential substitutes for corporate diversification and discuss how each can provide benefits similar to corporate diversification. Two obvious substitutes for diversification exist. First, instead of obtaining cost or revenue advantages from exploiting economies of scope across businesses in a diversified firm, a firm may decide to simply grow and develop each of its businesses separately. In this sense, a firm that successfully implements a cost leadership strategy or a product differentiation strategy in a single business can obtain the same cost or revenue advantages it could have obtained by exploiting economies of scope, but without having to develop cross-business relations. Growing independent businesses within a diversified firm can be a substitute for exploiting economies of scope in a diversification strategy. A second substitute for exploiting economies of scope in diversification can be found in strategic alliances. By using a strategic alliance, firms may be able to gain the economies of scope they could have obtained if they had carefully exploited economies of scope across businesses they own. Thus, for example, instead of a firm exploiting research and development economies of scope between two businesses it owns, it could form a strategic alliance with a different firm and form a joint research and development lab. Instead of a firm exploiting sales economies of scope by linking its businesses through a common sales force, it might develop a sales agreement with another firm and obtain cost or revenue advantages in this way. Page: 234 Difficulty: Moderate Chapter Objective: 7 100. Discuss why an international strategy can be thought of as a special case of corporate diversification strategy and discuss two unique challenges facing a firm pursuing international diversification opportunities and what firms can do to overcome these challenges. A firm pursuing international strategy is pursuing, least, a strategy of geographic diversification and perhaps a strategy of product-market diversification. In this sense, an international strategy can be thought of as a special case of a corporate diversification strategy. The two unique challenges facing firms pursuing international diversification are financial risks and political risks. The two most significant financial risks are currently fluctuations and different inflation rates across countries in which they operate. Currency fluctuations can significantly affect the value of a firm’s international investments either positively or negatively depending on the firm's exposure and position. Firms can use a variety of financial instruments and strategies to hedge against financial risks. Political risk involves changes in the political rules of the trò chơi and can have the effect of increasing some environmental threats, reducing others, and thereby changing the value of a firm’s resources and capabilities. Politics can affect the value of a firm’s international strategies the macro and micro levels. At the macro level, broad changes in the political
392 Part III situation in a country can change the value of an investment. At the micro level, politics in a country can affect the fortunes of particular firms in particular industries. Unlike financial risks, there are relatively few tools for managing the political risks associated with pursuing an international strategy. Options to reduce political risk include Pursuing international opportunities only in countries where political risk is very small. Limiting investments in politically risky environments. Treating each of the determinants of political risk as negotiation points as a firm enters into a new country market. Turning the threat of political risk into an opportunity by developing valuable, rare, and costly-to-imitate resources and capabilities in managing political risks. Pages:
Which of the following is a substitute for exploiting economies of scope in diversification?
One substitute for diversification that exists is that instead of obtaining cost or revenue advantages from exploiting economies of scope across businesses in a diversified firm, a firm may decide to simple grow and develop each of its businesses separately.Which of the following economies of scope is costly
Exploiting market power is an example of costly-to-duplicate economies of scope.Which one of the economies of scope is costly
36) Exploiting market power is an example of a costly-to-duplicate economies of scope.Which of the following forms of diversification occurs when a firm operates multiple?
EXPLANATION: Related diversification occurs when a firm operates multiple businesses within the same industry. Tải thêm tài liệu liên quan đến nội dung bài viết ________ are substitutes for exploiting economies of scope in diversification.