Corporate-level Strategy

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Question 1
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In the Chapter 6 Opening Case, Disney achieved growth and diversification through mergers and acquisitions.

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Question 2
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Disney (discussed in the Chapter 6 Opening Case) is an example of a company that was successful because its corporate strategy added value across its set of businesses above what the individual businesses could create individually.

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Question 3
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Corporate-level strategies are strategies a firm uses to diversify its operations from a single business competing in a single market into several product markets and, most commonly, into several businesses.

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Question 4
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If the businesses in the corporate portfolio are not worth more under the management of the corporation than they would be under any other ownership, then the corporate-level strategy has failed.

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Question 5
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An effective corporate strategy creates aggregate returns across all businesses that exceed what those returns would be without the strategy and contributes to the firm's strategic competitiveness and ability to earn above-average returns.

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Question 6
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A major advantage of diversification is that overall monitoring costs are reduced because each separate business comes under the control of corporate headquarters.

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Question 7
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Successful product diversification is expected to increase the variability in the firm's profitability because the earnings are generated from several different business units.

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Question 8
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All of Krispy Kreme's revenues come from its one main product, doughnuts. It can be considered a classic example of a firm following a related constrained strategy.

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Question 9
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Revenues for United Parcel Service (UPS) are derived from the following business segments: 60 percent from U.S. package delivery operations, 22 percent from international package delivery, and 18 percent from non-packaging operations. The best description of the corporate level strategy of UPS is unrelated diversification.

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Question 10
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Related linked firms share more resources and assets between their businesses than do related constrained firms.

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Question 11
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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.

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Question 12
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United Technologies, Textron, Samsung, and Hutchison Whampoa Limited are examples of diversified firms that have no relationships between their businesses. These firms all use the strategy of unrelated diversification.

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Question 13
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A firm uses a corporate-level diversification strategy for a variety of reasons, all of which have to do with ways to create value.

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Question 14
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Decisions to expand a firm's portfolio of businesses to reduce managerial risk can have a positive effect on the firm's value.

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Question 15
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Antitrust regulation, tax laws, and low performance are all value-neutral reasons why firms engage in diversification.

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Question 16
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Procter & Gamble (P&G) has a paper towel and baby diaper business that both use paper products. This is an example of value created through the sharing of activities.

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Question 17
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Economies of scope are cost savings resulting from a firm successfully leveraging, either through sharing or transferring, some of its capabilities and competencies developed in one business to another business.

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Question 18
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In a money-making effort, a small private university has decided to institute consulting services using its business faculty as consultants whose services would be sold to clients. This university is attempting to use its faculty to gain economies of scope.

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Question 19
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When firms share activities across units, they are often able to achieve increased value.

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Question 20
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Firms using the related constrained strategy share activities in order to create value.

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