WPC 480 Final Exam ACTUAL Questions
and CORRECT Answers
Corporate-Level Strategies - CORRECT ANSWER - - 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 select new strategic position
- Expected to increase firm value
- Two Key Issues: product markets and competition
Corporate Parenting Advantage - CORRECT ANSWER - - When better performances
comes under management of the diversified company than they would if they operated
independently
- Need for Diversification: Scope, reduce variability, additional cost, and balances of costs and
benefits
Single-Business Diversification Strategy - CORRECT ANSWER - - A corporate-level
strategy where in the firm generates 95% or more of its sales revenue from its core business area
- Low-Level Diversification Corporate-Level Strategy
- Potential supplier outputs and fewer challenges with narrow focus
Dominant-Business Diversification Strategy - CORRECT ANSWER - - The firm
generates between 70-95% of its total revenue from a single business area
- Low-Level Diversification Corporate-Level Strategy
- Potential supplier outputs and fewer challenges with narrow focus
Related Constrained Diversification Strategy - CORRECT ANSWER - - Links between
diversified firm businesses are direct and use similar sourcing, throughout, and outbound
processes
- Less than 70% of revenues comes from dominant business
- Moderate & High levels of Diversification Corporate-Level Strategy
,Related Link Diversification Strategy - CORRECT ANSWER - - When a diversified
company only have a few links between them in perusing a mix between related and unrelated
diversification strategy
- Less than 70% of revenues comes from dominant business
- Fewer resources and transferring of knowledge and competencies
- Moderate & High levels of Diversification Corporate-Level Strategy
Unrelated Diversification Strategy - CORRECT ANSWER - - Highly diversified firm that
has no strategic relationships between its businesses
- Conglomerates
- Less than 70% of revenues comes from dominant business
- Moderate & High levels of Diversification Corporate-Level Strategy
Value-Creating Reasons for Diversification - CORRECT ANSWER - - Economies of
Scale: Related Diversification (Sharing activities and transferring core competencies)
- Market Power: Related Diversification (Blocking competition and vertical integration)
- Financial Economies: Unrelated Diversification (Capital allocation and restructuring)
Synergy - CORRECT ANSWER - - When value created by business units working
together exceeds the value that those same units create working independently
- Reason for diversification
- Economies of scale or scope
Economies of Scope - CORRECT ANSWER - - Some economic factors that lead to cost
savings through sharing resources and capabilities or transferring one or more corporate-level
core competencies that were develop in one of a firms business to another one of its business
- Reason for diversification
- Related Diversification
, Value-Neutral Reasons for Diversification - CORRECT ANSWER - - Antitrust regulation
- Tax laws
- Low performance
- Uncertain future cash flows
- Risk reduction for the firm
- Tangible resources
- Intangible resources
Value-Reducing Reasons for Diversification - CORRECT ANSWER - - Diversifying
managerial employment risk
- Increasing managerial compensation
Operational Relatedness - CORRECT ANSWER - - Vertical dimension depicts
opportunities to share resources among the operational activities of the firm
- Sharing Activities
- Value-Creating Diversification: Related Constrained and Related Linked Diversification
Corporate Relatedness - CORRECT ANSWER - - Horizontal dimension suggests
opportunities for transferring corporate-level core competencies across businesses of the firm
- Transferring core competencies into business
- Value-Creating Diversification: Related Constrained and Related Linked Diversification
Corporate-level Core Competencies - CORRECT ANSWER - - Complex set of resources
and capabilities that link different businesses primarily through managerial and technological
knowledge, experience, and expertise
- Intangible resources and create value: resources instability
Related Constrained Diversification - CORRECT ANSWER - - High Operational
Relatedness
- Low Corporate Relatedness
and CORRECT Answers
Corporate-Level Strategies - CORRECT ANSWER - - 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 select new strategic position
- Expected to increase firm value
- Two Key Issues: product markets and competition
Corporate Parenting Advantage - CORRECT ANSWER - - When better performances
comes under management of the diversified company than they would if they operated
independently
- Need for Diversification: Scope, reduce variability, additional cost, and balances of costs and
benefits
Single-Business Diversification Strategy - CORRECT ANSWER - - A corporate-level
strategy where in the firm generates 95% or more of its sales revenue from its core business area
- Low-Level Diversification Corporate-Level Strategy
- Potential supplier outputs and fewer challenges with narrow focus
Dominant-Business Diversification Strategy - CORRECT ANSWER - - The firm
generates between 70-95% of its total revenue from a single business area
- Low-Level Diversification Corporate-Level Strategy
- Potential supplier outputs and fewer challenges with narrow focus
Related Constrained Diversification Strategy - CORRECT ANSWER - - Links between
diversified firm businesses are direct and use similar sourcing, throughout, and outbound
processes
- Less than 70% of revenues comes from dominant business
- Moderate & High levels of Diversification Corporate-Level Strategy
,Related Link Diversification Strategy - CORRECT ANSWER - - When a diversified
company only have a few links between them in perusing a mix between related and unrelated
diversification strategy
- Less than 70% of revenues comes from dominant business
- Fewer resources and transferring of knowledge and competencies
- Moderate & High levels of Diversification Corporate-Level Strategy
Unrelated Diversification Strategy - CORRECT ANSWER - - Highly diversified firm that
has no strategic relationships between its businesses
- Conglomerates
- Less than 70% of revenues comes from dominant business
- Moderate & High levels of Diversification Corporate-Level Strategy
Value-Creating Reasons for Diversification - CORRECT ANSWER - - Economies of
Scale: Related Diversification (Sharing activities and transferring core competencies)
- Market Power: Related Diversification (Blocking competition and vertical integration)
- Financial Economies: Unrelated Diversification (Capital allocation and restructuring)
Synergy - CORRECT ANSWER - - When value created by business units working
together exceeds the value that those same units create working independently
- Reason for diversification
- Economies of scale or scope
Economies of Scope - CORRECT ANSWER - - Some economic factors that lead to cost
savings through sharing resources and capabilities or transferring one or more corporate-level
core competencies that were develop in one of a firms business to another one of its business
- Reason for diversification
- Related Diversification
, Value-Neutral Reasons for Diversification - CORRECT ANSWER - - Antitrust regulation
- Tax laws
- Low performance
- Uncertain future cash flows
- Risk reduction for the firm
- Tangible resources
- Intangible resources
Value-Reducing Reasons for Diversification - CORRECT ANSWER - - Diversifying
managerial employment risk
- Increasing managerial compensation
Operational Relatedness - CORRECT ANSWER - - Vertical dimension depicts
opportunities to share resources among the operational activities of the firm
- Sharing Activities
- Value-Creating Diversification: Related Constrained and Related Linked Diversification
Corporate Relatedness - CORRECT ANSWER - - Horizontal dimension suggests
opportunities for transferring corporate-level core competencies across businesses of the firm
- Transferring core competencies into business
- Value-Creating Diversification: Related Constrained and Related Linked Diversification
Corporate-level Core Competencies - CORRECT ANSWER - - Complex set of resources
and capabilities that link different businesses primarily through managerial and technological
knowledge, experience, and expertise
- Intangible resources and create value: resources instability
Related Constrained Diversification - CORRECT ANSWER - - High Operational
Relatedness
- Low Corporate Relatedness
