Question 1 1 / 1 point
It can be difficult for investors to identify the value created by a firm as it shares activities and
transfers core competencies.
Question options:
True
False
Question 2 1 / 1 point
When firms share activities across units, they are often able to achieve increased value.
Question options:
True
False
Question 3 1 / 1 point
Contract manufacturers who manage their customers' entire product lines and offer services
ranging from inventory management to delivery and after-sales services are prime examples of
vertical integration.
Question options:
True
False
Question 4 1 / 1 point
Firms using a related diversification strategy may gain market power when successfully using
their related constrained or related linked strategy.
Question options:
True
False
Question 5 1 / 1 point
Compared with corporate office personnel, external investors have relatively limited access to
internal information and can only estimate the performances of individual businesses as well as
their future prospects.
Question options:
True
False
Question 6 1 / 1 point
Cost savings that occur when a firm transfers capabilities and competencies developed in one of
its businesses to another of its businesses.
Question options:
Economies of Scale
Financial Economies
Economies of Scope
None of the choices
Question 7 1 / 1 point
Compared with related constrained firms, related linked firms share fewer resources and assets
between their businesses, concentrating instead on transferring knowledge and core competencies
between the businesses.
Question options:
True
False
Question 8 1 / 1 point
Firms seeking to create value through corporate relatedness use the related constrained strategy.
Question options:
True
False
Question 9 1 / 1 point
Synergy exists when the value created by business units working together exceeds the value that
those same units create working independently.
Question options:
True
False
Question 10 1 / 1 point
Financial economies are cost savings realized through improved allocations of financial resources
based on investments inside or outside the firm.
Question options:
True
False
Question 11 1 / 1 point
A firm uses a corporate-level diversification strategy for a variety of reasons, all of which have to
do with ways to create value.
Question options:
True
False
Question 12 1 / 1 point
Firms that sold off related units in which resource sharing was a possible source of economies of
scope have been found to produce lower returns than those that sold off businesses unrelated to the
firm's core business.
Question options:
True
False
Question 13 1 / 1 point
GE is an example of a firm that has used internal capital market allocation as a means of creating
value even though it competes using a related linked strategy rather than an unrelated
diversification strategy.
Question options:
True
False
Question 14 1 / 1 point
In a diversified firm, capital allocation can be adjusted according to more specific criteria than is
possible with external market allocation of capital.
Question options:
True
False
Question 15 1 / 1 point
Knowing that their firms could be acquired if they are not managed successfully encourages
executives to use value-creating diversification strategies.
Question options:
True
False
Question 16 1 / 1 point
Firms create value by building upon or extending resources, capabilities, and __________.
Question options:
competencies
core competencies
cost
funds
Question 17 1 / 1 point
Performance continues to increase as diversification increases from single business to unrelated
diversification.
Question options:
True
False
Question 18 1 / 1 point
Corporate tax laws, rather than tax laws affecting individuals, have had the most impact on the
firm's use of free cash flows for investment in acquisitions.
Question options:
True
False
Question 19 1 / 1 point
Related linked firms share more resources and assets between their businesses than do related
constrained firms.
Question options:
True
False
Question 20 1 / 1 point
Market power exists when a firm can:
Question options:
adding the costs of its primary and support activities below the competitive level.
sets of resources and capabilities to link different businesses
sell its products above the existing competitive level
none of the choices
Question 21 1 / 1 point
Decisions to expand a firm's portfolio of businesses to reduce managerial risk can have a positive
effect on the firm's value.
Question options:
True
False
Question 22 1 / 1 point
A major advantage of diversification is that overall monitoring costs are reduced because each
separate business comes under the control of corporate headquarters.
Question options:
True
False
Question 23 1 / 1 point
Two or more diversified firms simultaneously compete in the same product areas or geographic
markets.
Answer: Multipoint Competition
Question 24 1 / 1 point
When a firm produces its own inputs.
Answer: Backward Integration
Question 25 1 / 1 point
Using complex sets of resources and capabilities to link different businesses through managerial
and technological knowledge, experience, and expertise
Question options:
Corporate relatedness
Shared resources
Related link
Operational relatedness
Question 26 1 / 1 point
Specifies actions taken by the firm to gain a competitive advantage by selecting and managing a
group of different businesses competing in different product markets.
Question options:
Corporate-Level Strategy
Business-Level Strategy
Competition
None of the choices
Question 27 1 / 1 point
It is created by sharing either a primary activity such as inventory delivery systems, or a support
activity such as purchasing.
Question options:
Corporate relatedness
Shared resources
Related link
Operational relatedness
Question 28 1 / 1 point
Diversification strategies can be used with both value-creating and value-neutral objectives
Question options:
True
False
Question 29 1 / 1 point
Value is created from economies of scope through:
Question options:
operational relatedness in sharing activities and corporate relatedness in transferring skills.
Unrelated diversification
Related link
none of the choices
Question 30 1 / 1 point
Compared to diversification that is grounded in intangible resources, diversification based on
financial resources only is more visible to competitors and thus more imitable and less likely to
create value on a long-term basis.
Question options:
True
False
