One way a diversified company can increase its profitability is by acquiring inefficient or poorly managed companies and then restructuring them to improve their performance.

Select one:

True

False

Transferring competencies across industries involves taking a distinctive competency developed in one industry and implanting it in an existing business unit in another industry.

Select one:

True

False

Companies with a strong track record of internal new venturing generally excel at research and development.

Select one:

True

False

If a company generates free cash flow, that money technically belongs to shareholders.

Select one:

True

False

Research finds that the higher the number of business units in a company's portfolio, the easier it is for corporate managers to remain informed about the complexities of each business.

Select one:

True

False

Firms can create profitable new business units by leveraging their competencies.

Select one:

True

False

An advantage of unrelated diversification is that competencies can be shared and leveraged throughout the value chain activities.

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True

False

An appropriate reason to diversify is to pool the risk from several business ventures to create a more stable income stream.

Select one:

True

False

If a company's core skills are highly specialized and have few applications outside the core business, then a company should pursue a related diversification strategy.

Select one:

True

False

At Burger King, multiple items such as a cheeseburger, french fries, and a drink are combined together to make a complete meal. This is an example of diversification.

Select one:

True

False

Which diversification strategy is based on the idea that the company creates value by applying the distinctive competencies it developed in one line of business to another business activity?

Select one:

a.Related diversification

b.Total diversification

c.A restructuring strategy

d.A taper diversification strategy

e.A technology acquisition strategy

Company leaders that base their diversification strategy on transferring competencies tend to acquire new businesses that are ______ to their existing business activities.

Select one:

a.identical

b.unrelated

c.related

d.opposed

e.not comparable

A strategy based on diversification may fail to add value because companies

Select one:

a.seek to achieve differentiation instead of low cost.

b.make acquisitions rather than develop new technologies on their own.

c.diversify into areas in which they have some knowledge and miss out on profitable opportunities in other areas.

d.incur bureaucratic costs that exceed the value created by the strategy.

e.seek to achieve a low-cost position instead of differentiation.

A company should pursue related diversification instead of unrelated diversification when the company's

Select one:

a.core skills are highly specialized and have few applications outside the core business.

b.top managers are skilled at acquiring and turning around poorly run enterprises.

c.main objective is to maximize its growth.

d.core skills are applicable to a wide variety of industrial and commercial situations.

e.free cash flow is high enough that it has funds available for investment.

Acquisitions often fail because of

Select one:

a.pre-acquisition screening that increases the time it takes to enter a market.

b.large-scale entry.

c.poor commercialization.

d.slowness in establishing significant market presence.

e.differences in corporate culture

Diversification may dissipate value if it is wrongly based on

Select one:

a.acquisitions and restructuring.

b.realizing economies of scope.

c.rescuing core business.

d.leveraging existing competencies.

e.transferring competencies.

Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue?

Select one:

a.Varying firm-specific conditions

b.Diversification for pooling risks

c.Steady industry conditions

d.Greater differentiation of products

e.Decreasing bureaucratic costs

Which of the following entry strategies should be used when speed is an important consideration?

Select one:

a.Internal new venture

b.Related diversification

c.Joint venture

d.Acquisition

e.Unrelated diversification

_______ involves taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry.

Select one:

a.Product bundling

b.Leveraging competencies

c.Sharing resources and capabilities

d.Strategic management capabilities

e.Transferring competencies

Which of the following statements is NOT generally true of a diversification strategy based on the realization of economies of scope?

Select one:

a.The strategy allows a company to realize cost economies among business units.

b.The strategy requires close coordination among different business units.

c.The strategy may allow a company to use shared resources more intensively, thereby realizing economies of scale.

d.The strategy requires managers to be aware of the costs of coordination.

e.The strategy requires the head office to evaluate each business unit as a stand-alone operation.