Chapter 8 Quiz: Diversification Strategies

What is the primary purpose of diversification?

• Increase employee engagement

• Reduce marketing costs

• Create added long-term value for shareholders

• Decrease supply chain disruptions

When should a firm consider diversifying?

• When current industry is performing well

• When facing long-term decline in its current industry

• When it has no competitors

• When its brand is unknown

What is the “Better-Off” test in diversification?

• It ensures marketing fits the strategy

• It determines if diversified units can perform better together

• It checks cost reduction potential

• It confirms the firm's debt load

What is meant by ‘economies of scope’?

• Increased output with the same inputs

• Cost-saving from scale

• Cost-saving from sharing value chain activities

• Increased revenue from unrelated businesses

What is a strategic fit?

• A marketing campaign alignment

• A match between business and market

• Valuable cross-business link in value chain activities

• Fit between leadership and staff

Which is a characteristic of unrelated diversification?

• Shared value chains

• Strategic fit

• No deliberate value chain alignment

• Brand synergy

What are 'cash cow' businesses?

• Businesses needing consistent investment

• Businesses generating steady cash flow

• Businesses with high growth potential

• Businesses requiring high marketing costs

What does a relative market share greater than 1.0 indicate?

• Weak competitive position

• High inventory levels

• Market-leading position

• Poor brand image

Which of the following is NOT part of the three tests for diversification?

• Industry Attractiveness

• Resource Availability

• Cost-of-Entry

• Better-Off

Which diversification path involves strategic synergy?

• Horizontal

• Vertical

• Related

• Unrelated