Question 1

Which of the following statements is NOT APPLICABLE to diversification?

Diversification helps expand the scope of operations of a company.

Diversification may be undertaken when the current industry in which a company operates stops offering growth potential.

Diversification always involves acquisitions in foreign countries.

Diversification may be undertaken to spread risks.

Question 2

Cash cows are business units that do not generate cash flows on their own and constantly require investments from the common pool of resources to fuel growth.

True

False

Question 3

A company that is currently in the hotel industry wants to diversify into the movie production business. It is currently in discussions with an existing company in the movie production business to purchase 100% of the shares of that company. Which mode of entry would this represent?

internal development

acquisition

licensing

joint venture

Question 4

Economies of scope are cost reductions as a result of producing more units of the product that the company manufactures.

True

False

Question 5

Added shareholder value is value that shareholders cannot create on their own by holding stocks of companies in different industries.

True

False

Question 6

Which of the following is NOT a test for assessing whether a diversification is creating value for shareholders?

better-off test

cost-of-entry test

industry attractiveness test

strategic group map

Question 7

One of the potential benefits of related diversification is brand sharing.

True

False

Question 8

Resource fit is both about a diversified company having enough resources to support all its businesses and each business strengthening the overall mix of resources and capabilities of the diversified company.

True

False

Question 9

A company is changing its business portfolio by moving out of some of its businesses and acquiring new ones. What is this process called?

Corporate restructuring

Backward integration

Forward integration

Corporate governance

Question 10

Resource fit is only about financial resources.

True

False