Chapter 7

Question 1

corporate diversification strategy

Answer 1

when a firm operates multiple industries or markets simultaneously

Question 2

geographic market diversification strategy

Answer 2

when a firm operates in multiple geographic markets simultaneously

Question 3

product market diversification strategy

Answer 3

when a firm implements both corporate and product market types of diversification

Question 4

types of corporate diversification

Answer 4

limited corporate diversification, related corporate diversification, unrelated corporate diversification

Question 5

limited corporate diversification

Answer 5

when all or most of its business activities fall within a single industry and geographic market, includes single business firms and dominant business firms

Question 6

related corporate diversification

Answer 6

when less than 70 percent of revenue comes from one product and lines of businesses are linked, includes related constrained and related linked

Question 7

un-related corporate diversification

Answer 7

when a firm’s businesses share few if any common attributes

Question 8

corporate diversification makes

Answer 8

economies of scope

operational economies of scope

Question 9

economies of scope

Answer 9

when the value of the products or services it sells increases as a function of the number of businesses in which the firm operates

Question 10

operational economies of scope

Answer 10

shared activities - when activities help multiple businesses

core competencies

Question 11

core competence

Answer 11

collective learning in the organization

Question 12

seemingly unrelated diversified firms

Answer 12

diversified firms exploiting core competencies not in shared activities

Question 13

internal capital market

Answer 13

diversification creates this where business activities are competing for resources

Question 14

escalation of commitment

Answer 14

where managers are irrationally committed to an investment