WPC 480 FINAL EXAM SCRIPT VERIFIED
QUESTIONS WITH ACCURATE ANSWERS
●● Single-business diversification strategy
Answer: corporate level strategy wherein the firm generates 95% or
more of its sales revenue from its core business area.
●● Dominant-business diversification strategy
Answer: the firm generates between 70% and 95% of its total revenue
within a single business area.
●● Related constrained diversification strategy
Answer: when the links between the diversified firm's businesses are
rather direct.
●● Related linked diversification strategy
Answer: A diversified company with a portfolio of businesses that have
only a few links between them is called a mixed related and unrelated
firm. (Used by firms seeking to create value through corporate
relatedness.)
●● Unrelated diversification strategy
,Answer: A highly diversified firm that has no relationships between its
businesses. (Firms using this strategy are called conglomerates. )
●● Economies of Scope
Answer: 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.
●● Corporate-level core competencies
Answer: complex sets of resources and capabilities that link different
businesses, primarily through managerial and technological knowledge,
experience, and expertise.
●● Market Power
Answer: exists when a firm is able to sell its products above the existing
competitive level or to reduce the costs of its primary and support
activities below the competitive level, or both.
●● Multipoint competition
Answer: exists when two or more diversified firms simultaneously
compete in the same product areas or geographic markets.
●● Vertical Integration
, Answer: exists when a company produces its own inputs (backward
integration) or owns its own source of output distribution (forward
integration).
●● Financial economies
Answer: cost savings realized through improved allocations of financial
resources based on investments inside or outside the firm.
●● Incentives to Diversify
Answer: Antitrust Regulation and Tax Laws, Low Performance,
Uncertain Future Cash Flows, and Synergy and Firm Risk Reduction
●● Synergy
Answer: exists when the value created by business units working
together exceeds the value that those same units create working
independently.
●● Business Level Strategy
Answer: Selecting strategy (e.g., cost leadership and differentiation) to
compete in individual market
●● Corporate Level Strategy (Companywide)
Answer: Selecting and managing a group of different businesses
competing in different product markets
QUESTIONS WITH ACCURATE ANSWERS
●● Single-business diversification strategy
Answer: corporate level strategy wherein the firm generates 95% or
more of its sales revenue from its core business area.
●● Dominant-business diversification strategy
Answer: the firm generates between 70% and 95% of its total revenue
within a single business area.
●● Related constrained diversification strategy
Answer: when the links between the diversified firm's businesses are
rather direct.
●● Related linked diversification strategy
Answer: A diversified company with a portfolio of businesses that have
only a few links between them is called a mixed related and unrelated
firm. (Used by firms seeking to create value through corporate
relatedness.)
●● Unrelated diversification strategy
,Answer: A highly diversified firm that has no relationships between its
businesses. (Firms using this strategy are called conglomerates. )
●● Economies of Scope
Answer: 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.
●● Corporate-level core competencies
Answer: complex sets of resources and capabilities that link different
businesses, primarily through managerial and technological knowledge,
experience, and expertise.
●● Market Power
Answer: exists when a firm is able to sell its products above the existing
competitive level or to reduce the costs of its primary and support
activities below the competitive level, or both.
●● Multipoint competition
Answer: exists when two or more diversified firms simultaneously
compete in the same product areas or geographic markets.
●● Vertical Integration
, Answer: exists when a company produces its own inputs (backward
integration) or owns its own source of output distribution (forward
integration).
●● Financial economies
Answer: cost savings realized through improved allocations of financial
resources based on investments inside or outside the firm.
●● Incentives to Diversify
Answer: Antitrust Regulation and Tax Laws, Low Performance,
Uncertain Future Cash Flows, and Synergy and Firm Risk Reduction
●● Synergy
Answer: exists when the value created by business units working
together exceeds the value that those same units create working
independently.
●● Business Level Strategy
Answer: Selecting strategy (e.g., cost leadership and differentiation) to
compete in individual market
●● Corporate Level Strategy (Companywide)
Answer: Selecting and managing a group of different businesses
competing in different product markets
