Question

1. A strategy of diversifying into unrelated businesses

   	a.	concentrates on diversifying into businesses where a company can exploit use of well-known and competitively potent brand name, earn the highest profit margins, and have the greatest number of attractive market opportunities.
   	b.	generally offers more competitive advantage potential than related diversification because of the ease of capturing valuable cross-business resource fits.
   	c.	is aimed chiefly at broadening a company’s present product line and offering customer a bigger choice of models, styles, and product versions.
   	d.	is the best way for a company to lower its overall business risk, achieve consistently good profitability, and earn a sustainable competitive advantage over rival companies.
   	e.	involves entering any industry and operating any business where senior managers see opportunity to realize consistently good financial results – there’s no deliberate effort to diversify only into businesses with valuable cross-business strategic fits.

Diversification ought to be considered when

	a.	a company has run out of ways to build more resource strengths in its present business.
	b.	diversifying into closely-related businesses opens new avenues for reducing costs.
	c.	a company faces an uphill battle in creating a more cost-efficient value chain.
	d.	a company’s profits are being squeezed and it is unable to boost earnings per share.
	e.	a company lacks sustainable competitive advantage in its present business.

Which of the following is not a strategic purpose or intended outcome associated with entering into a strategic alliance or partnership?

	a.	To help block or defend against a competitive threat or mitigate a significant risk to a company’s business.
	b.	To help remedy an important resource deficiency or competitive weakness.
	c.	To speed the development of promising new technologies and/or product innovations.
	d.	To facilitate entry into new geographic markets or pursuit of important market opportunities.
	e.	To enable greater vertical integration.

Which of the following best illustrates an economy of scope?

	a.	Being able to eliminate or reduce costs by offering customers a bigger selection of models, styles and product versions to choose from.
	b.	Being able to eliminate or reduce costs by operating over a wider geographic area.
	c.	Being able to eliminate or reduce costs by expanding the size of a company’s manufacturing plants or distribution centers.
	d.	Being able to eliminate or reduce costs by performing all of the value chain activities of related sister businesses at the same location.
	e.	Being able to eliminate or reduce costs by combining related value-chain activities of difference business into a single operation.

The classic reason for locating a particular value chain activity in a particular country is

	a.	to achieve low costs in performing that activity.
	b.	to be close to customers.
	c.	to take advantage of abundant supplies of highly skilled labor.
	d.	to minimize shipping costs.
	e.	to avoid adverse shifts in currency exchange rates.

Answer 1

e. Involves entering any industry and operating any business where senior managers see opportunity to realize consistently good financial results – there’s no deliberate effort to diversify only into businesses with valuable cross-business strategic fits is a strategy of diversifying into unrelated businesses. Whereas the remaining ones are not applicable in this context.

b. Diversifying into closely-related businesses opens new avenues for reducing costs is when diversification ought to be considered. Whereas the remaining ones are not appropriate situations.

e. To enable greater vertical integration is not a strategic purpose or intended outcome associated with entering into a strategic alliance or partnership. Whereas the remaining ones are various strategic purposes or intended outcomes associated with it.

e. Being able to eliminate or reduce costs by combining related value-chain activities of difference business into a single operation is the one that best illustrates an economy of scope. Whereas the remaining ones are not relevant in this context.

a. To achieve low costs in performing that activity is the classic reason for locating a particular value chain activity in a particular country. Whereas the remaining ones are not applicable in this context.

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