Mgmt 490- Chapter 8 Study Guide Questions And Correct Answers

Which of the following is a prime benefit of a strategy keyed to related diversification? -Corporate parents created in related diversification can propel the company's business forward and help them gain ground over their market rivals. -Related diversification is less capital intensive and usually less risky than unrelated diversification. -Related diversification offers potential 1 + 1 = 3 benefits because of valuable cross-business relationships among the value chains of the corporation's different businesses. -Related diversification leads to competitive advantage and increased profitability. -Related diversification passes the industry attractiveness test and thus offers the best route to 2 + 2 = 4 benefits. {Ans: -Related diversification offers potential 1 + 1 = 3 benefits because of valuable cross-business relationships among the value chains of the corporation's different businesses.}Economies of scope -are cost reductions that flow from operating in multiple related businesses. -arise only from strategic fit relationships in the production portions of the value chains of sister businesses. -are more associated with unrelated diversification than related diversification. -are present whenever diversification satisfies the attractiveness test and the cost of entry test. -arise mainly from strategic fit relationships in the distribution portions of the value chains of unrelated businesses. {Ans: