Chapter 10--Corporate-Level Strategy: Formulating and Implementing Related and Unrelated Diversification
Student: ___________________________________________________________________________
1. Diversification is the process of a company entering new industries distinct from its core industry, using a multibusiness model.
True False 2. Free cash flow refers to additional funds from a government stimulus program.
True False 3. If a company generates free cash flow, that money technically belongs to shareholders.
True False 4. Transferring competencies across industries involves taking a distinctive competency developed in one industry and implanting it in an existing business unit in another industry.
True False 5. A 100-year-old industrial giant, 3M serves as an example of how a company can leverage technology to create successful new business.
True False 6. If a company's core skills are highly specialized and have few applications outside the core business, then a company should pursue a related diversification strategy.
True False 7. A company should pursue related diversification only to enhance the competitive position of its core business.
True False 8. Economies of scope arise when one or more of a diversified company's business units are able to realize cost-saving or differentiation advantages because they can more effectively pool, share, and utilize resources or capabilities.
True False 9. Firms with superior strategic capabilities can create profitable new business units at a much higher rate than most other companies can.
True False 10. For diversification to increase profitability, a company's top managers must have superior entrepreneurial capabilities.
True False 11. One way a diversified company can increase its profitability is by acquiring inefficient or poorly managed companies and then