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Competing For Advantage 3rd Edition by Hoskisson - Test Bank
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,Chapter 8 - Corporate-Level StrategyTRUE/FALSE
1. Corporate-level strategies detail actions taken to gain a competitive advantage through the selection
and management of a group of different businesses competing in several industries and product
markets.
ANS: T PTS: 1 DIF: med REF: p. 225
OBJ: 1 NOT: knowledge
2. A primary approach to corporate-level strategy is through mergers and acquisitions.
ANS: F PTS: 1 DIF: med REF: p. 226
OBJ: 1 NOT: comprehension
3. UPS is an example of a company following a dominant business strategy.
ANS: T PTS: 1 DIF: med REF: p. 227
OBJ: 2 NOT: application
4. Unrelated diversification strategies are a uniquely American activity.
ANS: F PTS: 1 DIF: med REF: p. 228
OBJ: 1 NOT: knowledge
5. Using a conglomerate strategy has been the norm for successful firms in many European countries,
such as Germany, Italy, and France, but not in emerging economies.
ANS: F PTS: 1 DIF: hard REF: p. 241
OBJ: 1 NOT: comprehension
6. In the U.S., companies following the unrelated diversification strategy are typically family-controlled.
ANS: F PTS: 1 DIF: med REF: p. 241
OBJ: 1 NOT: knowledge
7. To properly execute strategic controls in firms using related diversification, the executives must have a
deep understanding of each unit’s business-level strategy.
ANS: T PTS: 1 DIF: med REF: p. 232
OBJ: 4 NOT: comprehension
8. Economies of scope are cost savings resulting from a firm successfully transferring some of its
capabilities and competencies developed in one business to another business.
ANS: T PTS: 1 DIF: med REF: p. 232
OBJ: 3 NOT: knowledge
9. Firms may seek to create value from economies of scope by sharing activities and transferring capital
resources.
, ANS: F PTS: 1 DIF: med REF: p. 232
OBJ: 3 NOT: comprehension
10. When firms share activities across units, they are often able to create value and improve financial
returns.
ANS: T PTS: 1 DIF: med REF: p. 233
OBJ: 3 NOT: comprehension
11. Proctor & Gamble (P&G) uses a paper production plant jointly for its paper towel and baby diaper
businesses. This use of P&G’s production plant is an example of activity sharing.
ANS: T PTS: 1 DIF: med REF: p. 233
OBJ: 4 NOT: application
12. Market power exists when a firm is able to sell its products above the existing competitive level or
decrease the costs of its primary and support activities below the competitive level, or both.
ANS: T PTS: 1 DIF: med REF: p. 237
OBJ: 5 NOT: knowledge
13. Mutual forbearance exists when two or more diversified firms compete in the same product areas or
geographic markets.
ANS: F PTS: 1 DIF: med REF: p. 237
OBJ: 5 NOT: knowledge
14. Mutual forbearance is the situation in which a responding firm takes the same strategic action as the
attacking firm, thus signaling a commitment to defend the status quo without escalating rivalry.
ANS: F PTS: 1 DIF: hard REF: p. 237
OBJ: 5 NOT: knowledge
15. Many manufacturing firms (such as Ford and GM) are developing independent supplier networks as a
part of their vertical integration strategies.
ANS: F PTS: 1 DIF: hard REF: p. 238
OBJ: 5 NOT: comprehension
16. Vertical integration continues to be the focus of most manufacturing firms, including Intel and Dell,
attempting to gain market power.
ANS: F PTS: 1 DIF: med REF: p. 238
OBJ: 5 NOT: application
17. An unrelated diversification strategy can create value through two types of financial economies:
efficient internal capital allocations and purchasing other corporations and restructuring their assets.
ANS: T PTS: 1 DIF: hard REF: p. 239|p. 240
OBJ: 6 NOT: comprehension
18. The informational benefits of an internal capital market include limiting access to information for
external competitors to analyze.
, ANS: T PTS: 1 DIF: med REF: p. 240
OBJ: 6 NOT: comprehension
19. In a diversified firm, capital allocation can be adjusted according to more specific criteria than is
possible with external market allocation.
ANS: T PTS: 1 DIF: med REF: p. 240
OBJ: 6 NOT: knowledge
20. Few of the companies following an unrelated diversification strategy are found in the less-developed
countries of the world.
ANS: F PTS: 1 DIF: hard REF: p. 241
OBJ: 6 NOT: comprehension
21. When implementing a restructuring strategy, success usually calls for a focus on mature, low-
technology businesses.
ANS: T PTS: 1 DIF: med REF: p. 241
OBJ: 6 NOT: comprehension
22. No organizational form encourages competition for capital between separate divisions of the
corporation.
ANS: F PTS: 1 DIF: med REF: p. 242
OBJ: 7 NOT: comprehension
23. Government policy provides few incentives for either increased or decreased levels of diversification.
ANS: F PTS: 1 DIF: med REF: p. 243|p. 244
OBJ: 8 NOT: comprehension
24. Since the 1950s, the level of diversification in American corporations has remained constant.
ANS: F PTS: 1 DIF: med REF: p. 243|p. 244
OBJ: 8 NOT: knowledge
25. As illustrated by the Australian media and investment company Seven Network Ltd., low performance
may provide an incentive for greater diversification.
ANS: T PTS: 1 DIF: hard REF: p. 245
OBJ: 8 NOT: application
26. Free cash flows, as such, are less likely to be a source of competitive advantage than other types of
resources.
ANS: T PTS: 1 DIF: hard REF: p. 246
OBJ: 8 NOT: comprehension
27. Whenever governance mechanisms are implemented, managers will not attempt to diversify the firm
to a point at which it fails to earn average returns.
ANS: F PTS: 1 DIF: med REF: p. 247
OBJ: 9 NOT: comprehension
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