BUSA 4980 FINAL EXAM | STRATEGIC MANAGEMENT|
QUESTIONS WITH VERIFIED ANSWERS
corporate level strategy - Answers - specifies actions a firm takes to gain a competitive
advantage by selecting and managing a group of different businesses competing in
different product markets
-*Strategies firms use to diversify their operations*
Primary form = Product diversification
Diversification - Answers - *primary concern to corporate level strategy*
top level managers implement a multi business effort encompassing a variety of
industry environments. Leads to theory firms diversify when they have excess resources
and capabilitiues and core competencies with multiple uses.
product diversification - Answers - Diversifying helps firms obtain economies of scope
and gain market power within the mkt the firm competes
-*how managers buy, create and sell different businesses to match skills and strengths
with opportunities presented to the firm*
corporate level strategy value - Answers - The degree to which the businesses in the
portfolio are worth more under the
management of the company than they would be under other ownership
Low Level of Diversification - Answers - Firms that follow single- or dominant-business
strategies
Single Business - Answers - More than 95% of revenue comes from a single business
(Wrigley's Spearmint)
Dominant Business - Answers - Between 70% and 95% of revenue comes from a single
business (Lifetouch)
Moderate to High Diversification - Answers - *Related Constrained:* Less than 70% of
revenue comes from a single business and all business share product, technological,
and distribution linkages (Coca Cola drinks). Benefit: Market power and vertical
integration
*Related Linked (mixed related and unrelated):* Less than 70% of revenue comes from
the dominant business, and there are only limited links between business (Pepsi Brand:
Lays, KFC, drinks) Benefit: Sharing activities and transferring of core competences
, Which form of diversification tends to add more value? - Answers - related
diversification creates more value
related diversification - Answers - creating or acquiring companies that share similar
products, manufacturing, marketing, technology, or cultures
reasons for diversification - Answers - value-creating
value-neutral
value-reducing
Value-Creating Diversification - Answers - -economies of scope (related diversification)
-market power (related diversification)
-financial economies (unrelated diversification)
Value-Neutral Diversification - Answers - - incentives from antitrust legislation and tax
laws
- low performance
- risk reduction
Value-Reducing Diversification - Answers - -Diversifying managerial employment risk
-Increasing managerial compensation
economies of scope - Answers - cost savings that the firm creates by successfully
sharing some of its resources and capabilities or transferring one or more corporate-
level core competencies that were developed in one of its businesses to another of its
businesses
unrelated diversification - Answers - creating or acquiring companies in completely
unrelated businesses
Operational Relatedness (sharing activities) - Answers - Created by sharing either a
primary activity such as inventory delivery systems, or a support activity such as
purchasing
-requires sharing strategic control over business units
-may create risk bc business unit ties create links b/w outcomes
Corporate Relatedness (Transferring Core Competencies) - Answers - -Transferring
skills into businesses through corporate headquarters
using complex sets of resources and
capabilities to link different businesses through
managerial and technological knowledge,
experience, and expertise.
QUESTIONS WITH VERIFIED ANSWERS
corporate level strategy - Answers - specifies actions a firm takes to gain a competitive
advantage by selecting and managing a group of different businesses competing in
different product markets
-*Strategies firms use to diversify their operations*
Primary form = Product diversification
Diversification - Answers - *primary concern to corporate level strategy*
top level managers implement a multi business effort encompassing a variety of
industry environments. Leads to theory firms diversify when they have excess resources
and capabilitiues and core competencies with multiple uses.
product diversification - Answers - Diversifying helps firms obtain economies of scope
and gain market power within the mkt the firm competes
-*how managers buy, create and sell different businesses to match skills and strengths
with opportunities presented to the firm*
corporate level strategy value - Answers - The degree to which the businesses in the
portfolio are worth more under the
management of the company than they would be under other ownership
Low Level of Diversification - Answers - Firms that follow single- or dominant-business
strategies
Single Business - Answers - More than 95% of revenue comes from a single business
(Wrigley's Spearmint)
Dominant Business - Answers - Between 70% and 95% of revenue comes from a single
business (Lifetouch)
Moderate to High Diversification - Answers - *Related Constrained:* Less than 70% of
revenue comes from a single business and all business share product, technological,
and distribution linkages (Coca Cola drinks). Benefit: Market power and vertical
integration
*Related Linked (mixed related and unrelated):* Less than 70% of revenue comes from
the dominant business, and there are only limited links between business (Pepsi Brand:
Lays, KFC, drinks) Benefit: Sharing activities and transferring of core competences
, Which form of diversification tends to add more value? - Answers - related
diversification creates more value
related diversification - Answers - creating or acquiring companies that share similar
products, manufacturing, marketing, technology, or cultures
reasons for diversification - Answers - value-creating
value-neutral
value-reducing
Value-Creating Diversification - Answers - -economies of scope (related diversification)
-market power (related diversification)
-financial economies (unrelated diversification)
Value-Neutral Diversification - Answers - - incentives from antitrust legislation and tax
laws
- low performance
- risk reduction
Value-Reducing Diversification - Answers - -Diversifying managerial employment risk
-Increasing managerial compensation
economies of scope - Answers - cost savings that the firm creates by successfully
sharing some of its resources and capabilities or transferring one or more corporate-
level core competencies that were developed in one of its businesses to another of its
businesses
unrelated diversification - Answers - creating or acquiring companies in completely
unrelated businesses
Operational Relatedness (sharing activities) - Answers - Created by sharing either a
primary activity such as inventory delivery systems, or a support activity such as
purchasing
-requires sharing strategic control over business units
-may create risk bc business unit ties create links b/w outcomes
Corporate Relatedness (Transferring Core Competencies) - Answers - -Transferring
skills into businesses through corporate headquarters
using complex sets of resources and
capabilities to link different businesses through
managerial and technological knowledge,
experience, and expertise.
