Value Creating Diversification and Corporate Core Competencies Quiz

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What is the concept of economies of scope in diversification?

Cost savings a firm creates by successfully sharing resources and capabilities.

What is the main characteristic of an unrelated diversification strategy?

Less than 70% of revenue comes from the dominant business, and there are no common links between businesses.

Define corporate-level core competencies in the context of diversification.

Complex sets of resources and capabilities that link different businesses.

What is market power in diversification?

Exist when a firm is able to sell its product above the existing competitive level. Signup and view all the answers

Explain the concept of multipoint competition in diversification.

Exists when two or more diversified firms simultaneously compete in the same product areas or geographical markets. Signup and view all the answers

What is vertical integration in the context of diversification?

Exists when a company produces its own inputs (backward integration) or owns its own source of output distribution (forward integration). Signup and view all the answers

Define market power and provide an example of how a firm can increase its market power through horizontal acquisition.

Market power exists when a firm can sell its goods and services above competitive levels. A firm can increase its market power through horizontal acquisition by exploiting cost-based and revenue-based synergies. Signup and view all the answers

What is the difference between vertical acquisition and related acquisition?

Vertical acquisition involves acquiring a supplier or distributor, while related acquisition focuses on creating value through synergy by integrating resources and capabilities. Signup and view all the answers

Explain what barriers to entry are and how they affect new firms trying to enter a market.

Barriers to entry are factors that increase the expense and difficulty new firms face when entering a market. These barriers can be created by existing firms or market conditions. Signup and view all the answers

Why are cross-border acquisitions significant in the business world?

Cross-border acquisitions are important as they involve companies with headquarters in different countries. They allow firms to expand their market reach and access new opportunities globally. Signup and view all the answers

Discuss the advantages of acquiring new products compared to developing them internally.

Acquiring new products provides lower risk as the outcomes can be estimated more easily. It also allows for increased diversification and faster speed to market. Signup and view all the answers

How can firms benefit from increased diversification in the context of developing and introducing new products?

Increased diversification can make it easier for firms to introduce new products in markets they are currently serving. It allows for a broader product portfolio and can help spread risks. Signup and view all the answers

What is synergy in the context of business?

Synergy exists when the value created by units working together exceeds the value that those units could create working independently. Signup and view all the answers

What are private synergies?

Private synergies are created when combining and integrating assets of acquiring and acquired firms yield capabilities and core competencies that couldn't be developed otherwise. Signup and view all the answers

What is the downside of managers being overly focused on acquisitions?

Managers' considerable time and energy are required for acquisition strategies to be successful. Signup and view all the answers

Define restructuring as a business strategy.

Restructuring is when a firm changes its set of businesses or its financial structure. Signup and view all the answers

What is downsizing in the context of business?

Downsizing is a reduction in the number of a firm's employees and sometimes in the number of its operating units. Signup and view all the answers

What are the activities managers get involved in during the acquisition process?

Managers get involved in searching for viable acquisition candidates, due diligence, negotiations, and managing the integration process. Signup and view all the answers

What are the two basic types of international strategies that firms can choose from?

International Business Level Strategy and International Corporate Level Strategy Signup and view all the answers

What does 'Factors of Production' refer to under the determinants of national advantage?

Inputs necessary for a firm to compete in any industry such as labor, land, natural resources, capital, and infrastructure. Signup and view all the answers

How can firms reduce costs by utilizing 'Location Advantages'?

By locating facilities in international locations that provide easier access to lower cost labor, energy, and natural resources. Signup and view all the answers

What is the significance of 'Demand Conditions' in the determinants of national advantage?

It is characterized by the nature and size of customers' needs in the home market for the products firms produce. Signup and view all the answers

How can continual process improvements impact firms?

They enhance the ability to reduce costs and increase the value of products for customers. Signup and view all the answers

What role do related and supporting industries play in national advantage?

They are businesses that supply inputs or purchase businesses' outputs, forming a network of support. Signup and view all the answers

What is a transnational strategy and what does it aim to achieve?

A transnational strategy is an international strategy that seeks to achieve both global efficiency and local responsiveness. Signup and view all the answers

What is the concept of Liability of Foreignness?

Liability of Foreignness refers to the costs associated with issues firms face when entering foreign markets, such as unfamiliar operating environments, cultural differences, and coordination challenges. Signup and view all the answers

How does regionalization influence a firm's choice of international strategies?

Regionalization influences a firm's choice by allowing it to focus on specific regions to compete effectively and understand the local cultures and norms. Signup and view all the answers

What is the mode of entry called exporting and how is it used by firms?

Exporting is when a firm sends products produced in its domestic market to international markets as the initial mode of entry. Signup and view all the answers

What are the key elements influencing a firm's choice of international corporate-level strategies?

Two important trends are Liability of Foreignness and Regionalization. Signup and view all the answers

How does the concept of regional focus help firms in international competition?

Regional focus helps firms by enabling better understanding of local cultures, legal norms, and other factors crucial for effective competition in those markets. Signup and view all the answers