Chapter 6—Corporate-Level Strategy
TRUE/FALSE
1. In 2005, Gillette was acquired by Proctor & Gamble (P&G). This is an example of business level
strategic action initiated by P&G.
ANS: F PTS: 1 DIF: Easy REF: 153
OBJ: 06-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Strategic & systems skills
2. A business-level strategy indicates product markets and businesses in which the firm should
compete.
ANS: F PTS: 1 DIF: Medium REF: 154
OBJ: 06-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
3. If the businesses in the corporate portfolio are not worth more under the management of the
corporation than they would be under any other ownership, then the corporate-level strategy has
failed.
ANS: T PTS: 1 DIF: Medium REF: 155
OBJ: 06-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
4. A major advantage of diversification is that overall monitoring costs are reduced, since each separate
business comes under the control of corporate headquarters.
ANS: F PTS: 1 DIF: Medium REF: 155
OBJ: 06-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
5. Successful product diversification is expected to increase the variability in the firm’s profitability,
since the earnings are generated from several different business units.
ANS: F PTS: 1 DIF: Easy REF: 155
OBJ: 06-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing administration & control
6. All of Krispy Kreme’s revenues come from its one main product, doughnuts. It can be considered a
classic example of a firm following a constrained strategy.
ANS: F PTS: 1 DIF: Easy REF: 155-156
OBJ: 06-02 TYPE: application
, NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
7. Revenues for United Parcel Service (UPS) are derived from the following business segments: 74
percent from U.S. package delivery operations, 17 percent from international package delivery, and 9
percent from non-packaging operations. The best description of the corporate level strategy of UPS is
unrelated diversification.
ANS: F PTS: 1 DIF: Medium REF: 156
OBJ: 06-02 TYPE: application
NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing
strategy & innovation
8. Related linked firms share more resources and assets between their businesses than do related
constrained firms.
ANS: F PTS: 1 DIF: Medium REF: 156-157
OBJ: 06-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
9. Lapworth Industries diversifies by buying companies in unrelated industries. Lapworth probably has a
strategy to create value through organizational synergy.
ANS: F PTS: 1 DIF: Medium REF: 157
OBJ: 06-03 TYPE: application
NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing
strategy & innovation
10. A high number of opportunities to share activities among companies in a diversified organization is
called high operational relatedness.
ANS: T PTS: 1 DIF: Easy REF: 157-159
OBJ: 06-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
11. Blocking competitors through multipoint competition is a strategy used by related diversified firms to
create value.
ANS: T PTS: 1 DIF: Medium REF: 158 (Table 6.1) | 161
OBJ: 06-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing the task environment
12. PepsiCo uses its own distribution system to deliver multiple Pepsi branded beverage products. Pepsi
recently acquired Gatorade and delivers these products using the Pepsi distribution system. This use
of Pepsi’s outbound logistics is an example of activity sharing.
ANS: T PTS: 1 DIF: Medium REF: 159-160
, OBJ: 06-04 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
13. P&G acquired Gillette Co. and created the Crest Pro-Health label by combining P&G’s Crest with
Gillette’s Oral-B brands. This is an example of achieving synergies through sharing activities.
ANS: T PTS: 1 DIF: Medium REF: 159-160 | 153
OBJ: 06-04 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
14. Economies of scope are cost savings resulting from a firm successfully leveraging, either through
sharing or transferring, some of its capabilities and competencies developed in one business to
another business.
ANS: T PTS: 1 DIF: Medium REF: 160
OBJ: 06-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
15. In a money-making effort, a small private university has decided to institute consulting services using
its business faculty as consultants whose services would be sold to clients. This university is
attempting to use its faculty to gain economies of scope.
ANS: T PTS: 1 DIF: Hard REF: 160
OBJ: 06-04 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
16. When firms share activities across units, they are often able to achieve increased value.
ANS: T PTS: 1 DIF: Medium REF: 160
OBJ: 06-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Strategic & systems skills
17. Corporate level core competencies are resources and capabilities held within specific business units
within the corporate portfolio.
ANS: F PTS: 1 DIF: Medium REF: 160
OBJ: 06-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
18. Market power exists when a firm is able to sell its products above the existing competitive level or
decrease the costs of its primary and support activities below the competitive level, or both.
ANS: T PTS: 1 DIF: Medium REF: 161
OBJ: 06-04 TYPE: knowledge
, NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
19. Equator, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same industry in Ireland.
It plans to move one of its key managers from its plant in St. Louis to Ireland. This can be considered a
method of transferring corporate-level core competencies.
ANS: T PTS: 1 DIF: Medium REF: 160-161
OBJ: 06-04 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
20. As product markets become worldwide, we can expect that multipoint competition will decrease.
ANS: F PTS: 1 DIF: Medium REF: 161
OBJ: 06-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing the task environment
21. Vertical integration exists when a company produces its own inputs (forward integration) or owns its
own source of output distribution (backward integration).
ANS: F PTS: 1 DIF: Medium REF: 162
OBJ: 06-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
22. Partial vertical integration is not practical because it involves excessive levels of coordination
between internal company units and outside contractors.
ANS: F PTS: 1 DIF: Easy REF: 162
OBJ: 06-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
23. Many manufacturing firms are de-integrating and moving to independent supplier networks.
ANS: T PTS: 1 DIF: Medium REF: 162
OBJ: 06-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
24. Contract manufacturers who manage their customers’ entire product line, and offer services ranging
from inventory management to delivery and after-sales services are prime examples of vertical
integration.
ANS: F PTS: 1 DIF: Hard REF: 162
OBJ: 06-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
TRUE/FALSE
1. In 2005, Gillette was acquired by Proctor & Gamble (P&G). This is an example of business level
strategic action initiated by P&G.
ANS: F PTS: 1 DIF: Easy REF: 153
OBJ: 06-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Strategic & systems skills
2. A business-level strategy indicates product markets and businesses in which the firm should
compete.
ANS: F PTS: 1 DIF: Medium REF: 154
OBJ: 06-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
3. If the businesses in the corporate portfolio are not worth more under the management of the
corporation than they would be under any other ownership, then the corporate-level strategy has
failed.
ANS: T PTS: 1 DIF: Medium REF: 155
OBJ: 06-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
4. A major advantage of diversification is that overall monitoring costs are reduced, since each separate
business comes under the control of corporate headquarters.
ANS: F PTS: 1 DIF: Medium REF: 155
OBJ: 06-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
5. Successful product diversification is expected to increase the variability in the firm’s profitability,
since the earnings are generated from several different business units.
ANS: F PTS: 1 DIF: Easy REF: 155
OBJ: 06-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing administration & control
6. All of Krispy Kreme’s revenues come from its one main product, doughnuts. It can be considered a
classic example of a firm following a constrained strategy.
ANS: F PTS: 1 DIF: Easy REF: 155-156
OBJ: 06-02 TYPE: application
, NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
7. Revenues for United Parcel Service (UPS) are derived from the following business segments: 74
percent from U.S. package delivery operations, 17 percent from international package delivery, and 9
percent from non-packaging operations. The best description of the corporate level strategy of UPS is
unrelated diversification.
ANS: F PTS: 1 DIF: Medium REF: 156
OBJ: 06-02 TYPE: application
NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing
strategy & innovation
8. Related linked firms share more resources and assets between their businesses than do related
constrained firms.
ANS: F PTS: 1 DIF: Medium REF: 156-157
OBJ: 06-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
9. Lapworth Industries diversifies by buying companies in unrelated industries. Lapworth probably has a
strategy to create value through organizational synergy.
ANS: F PTS: 1 DIF: Medium REF: 157
OBJ: 06-03 TYPE: application
NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing
strategy & innovation
10. A high number of opportunities to share activities among companies in a diversified organization is
called high operational relatedness.
ANS: T PTS: 1 DIF: Easy REF: 157-159
OBJ: 06-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
11. Blocking competitors through multipoint competition is a strategy used by related diversified firms to
create value.
ANS: T PTS: 1 DIF: Medium REF: 158 (Table 6.1) | 161
OBJ: 06-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing the task environment
12. PepsiCo uses its own distribution system to deliver multiple Pepsi branded beverage products. Pepsi
recently acquired Gatorade and delivers these products using the Pepsi distribution system. This use
of Pepsi’s outbound logistics is an example of activity sharing.
ANS: T PTS: 1 DIF: Medium REF: 159-160
, OBJ: 06-04 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
13. P&G acquired Gillette Co. and created the Crest Pro-Health label by combining P&G’s Crest with
Gillette’s Oral-B brands. This is an example of achieving synergies through sharing activities.
ANS: T PTS: 1 DIF: Medium REF: 159-160 | 153
OBJ: 06-04 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing strategy & innovation
14. Economies of scope are cost savings resulting from a firm successfully leveraging, either through
sharing or transferring, some of its capabilities and competencies developed in one business to
another business.
ANS: T PTS: 1 DIF: Medium REF: 160
OBJ: 06-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
15. In a money-making effort, a small private university has decided to institute consulting services using
its business faculty as consultants whose services would be sold to clients. This university is
attempting to use its faculty to gain economies of scope.
ANS: T PTS: 1 DIF: Hard REF: 160
OBJ: 06-04 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
16. When firms share activities across units, they are often able to achieve increased value.
ANS: T PTS: 1 DIF: Medium REF: 160
OBJ: 06-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Strategic & systems skills
17. Corporate level core competencies are resources and capabilities held within specific business units
within the corporate portfolio.
ANS: F PTS: 1 DIF: Medium REF: 160
OBJ: 06-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
18. Market power exists when a firm is able to sell its products above the existing competitive level or
decrease the costs of its primary and support activities below the competitive level, or both.
ANS: T PTS: 1 DIF: Medium REF: 161
OBJ: 06-04 TYPE: knowledge
, NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
19. Equator, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same industry in Ireland.
It plans to move one of its key managers from its plant in St. Louis to Ireland. This can be considered a
method of transferring corporate-level core competencies.
ANS: T PTS: 1 DIF: Medium REF: 160-161
OBJ: 06-04 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
20. As product markets become worldwide, we can expect that multipoint competition will decrease.
ANS: F PTS: 1 DIF: Medium REF: 161
OBJ: 06-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing the task environment
21. Vertical integration exists when a company produces its own inputs (forward integration) or owns its
own source of output distribution (backward integration).
ANS: F PTS: 1 DIF: Medium REF: 162
OBJ: 06-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
22. Partial vertical integration is not practical because it involves excessive levels of coordination
between internal company units and outside contractors.
ANS: F PTS: 1 DIF: Easy REF: 162
OBJ: 06-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
23. Many manufacturing firms are de-integrating and moving to independent supplier networks.
ANS: T PTS: 1 DIF: Medium REF: 162
OBJ: 06-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
24. Contract manufacturers who manage their customers’ entire product line, and offer services ranging
from inventory management to delivery and after-sales services are prime examples of vertical
integration.
ANS: F PTS: 1 DIF: Hard REF: 162
OBJ: 06-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing strategy & innovation
