WEEK 2 – UNGRADED QUESTIONS

The following are ungraded questions. The answers for the questions are located at the
bottom of the page.

Please choose whether the following questions are true or false.

1) A company is said to be diversified if it operates in a single product market

a) True
b) False

2) Related product diversification refers to a firm’s entry into new products that requires
leveraging its existing activities and capabilities
a) True
b) False

3) In a Business Group, each company can keep its surplus cash to itself and also raise
funds from the external market unlike a multidivisional firm
a) True
b) False

4) The examples of Adidas and Titan given in the video lecture 2.2.1 refer to single
business diversification strategy?
a) True
b) False

5) Economies of scope arise when there is no sharing of resources and inputs between
firms
a) True
b) False

6) Financial economies gained from diversification can provide for hedging of

bankruptcy risk
a) True
b) False

7) The difference between related linked and related constrained diversification is the
former involves leveraging more specific capabilities while the latter entails
leveraging business generic capabilities
a) True
b) False
8) Potential to reduce costs by sharing resources across multiple products is a motive for
diversification.
a) True
b) False

9) An IT firm derives 95% of its revenue from customized business process management
and the balance 5% by providing other related IT services. This firm has a related link
diversification strategy.
a) True
b) False

10) A firm ‘ABC’ is into the business of running airlines, producing music labels, owning
a telecom service provider, and into specialty health care. ABC follows unrelated
diversification strategy does ABC follow?
a) True
b) False

ANSWERS

1) False
2) True
3) True
4) False
5) False
6) True
7) False
8) True
9) False
10) True