BUSI 4940 Chapter 6 Practice Questions & Elaborative Answers 2024/2025

BUSI 4940 Chapter 6 Practice Questions & Elaborative Answers 2024/2025 what are corporate-level strategies? - ANSWER--strategies firms use to diversify their operations from a single business competing in a single market into several product markets—most commonly, into several businesses -specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets -help companies to select new strategic positions—positions that are expected to increase the firm's value why do firms use corporate-level strategies? - ANSWER--a means to grow revenues and profits -pursue defensive or offensive strategies that realize growth but have different strategic intents -pursue market development by entering different geographic markets -acquire competitors (horizontal integration) or buy a supplier or customer (vertical integration) what are the two types of strategies that firms form? - ANSWER--corporate-level (company-wide) -business-level (competitive) Corporate-level strategy is concerned with two key issues: - ANSWER-1. in what product markets and businesses the firm should compete 2. how corporate headquarters should manage those businesses For the diversified company, a business-level strategy - ANSWER-must be selected for each of the businesses in which the firm has decided to compete. a corporate-level strategy's value is ultimately determined by - ANSWER-the degree to which "the businesses in the portfolio are worth more under the management of the company than they would be under any other ownership an effective corporate-level strategy creates, across all of a firm's businesses, - ANSWER--aggregate returns that exceed what those returns would be without the strategy -contributes to the firm's strategic competitiveness and its ability to earn above-average returns Product diversification - ANSWER--a primary form of corporate-level strategies -concerns the scope of the markets and industries in which the firm competes as well as "how managers buy, create, and sell different businesses to match skills and strengths with opportunities presented to the firm. Successful diversification is expected to - ANSWER--reduce variability in the firm's profitability as earnings are generated from different businesses -can also provide firms with the flexibility to shift their investments to markets where the greatest returns are possible rather than being dependent on only one or a few markets. Because firms incur development and monitoring costs when diversifying, - ANSWER-the ideal portfolio of businesses balances diversification's costs and benefits. related diversification - ANSWER-signifies a moderate to high level of diversification for the firm the related constrained strategy - ANSWER-the sharing of resources the related linked strategy - ANSWER-the transferring of core competencies across the firm's different businesses related diversification - ANSWER--A firm is related through its diversification when its businesses share several links. -For example, businesses may share product markets (goods or services), technologies, or distribution channels. The more links among businesses, the more "constrained" is the level of diversification unrelated diversification - ANSWER-refers to the absence of direct links between businesses. Low levels of Diversification - Types - ANSWER--Single Business: 95% or more of revenue comes from a single business -Dominant Business: Between 70 and 95% of revenue comes from a single business Moderate to High Levels of Diversification - Types - ANSWER--Related Constrained: Less than 70% of revenue comes from the dominant business, and all businesses share product, technological, and distribution linkages -Related Linked/Mixed Related and Unrelated: Less than 70% of revenue comes from the dominant business. and there are only limited links between businesses Very High Levels of Diversification - Types - ANSWER--Unrelated: Less than 70% of revenue comes from the dominant business, and there are no common links between businesses Low levels of Diversification (Single Business & Dominant Business) - ANSWER--Firms that focus on one or very few businesses and markets can earn positive returns, because they develop capabilities useful for these markets and can provide superior service to their customers. -there are fewer challenges in managing one or a very small set of businesses, allowing them to gain economies of scale and efficiently use their resources it is a related constrained diversification strategy when - ANSWER--the links between the diversified firm's businesses are rather direct—meaning they use similar sourcing, throughput, and outbound processes Continues...