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CH6_Sample Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. The lowest level of diversification is the ____ level. a. single business b. dominant business c. related constrained d. unrelated ____ 2. The Publicis Groupe (Chapter 6 Strategic Focus) uses the digital technology from its digital business to enhance the advertising products in its advertising group. This sharing of activities is characteristic of the _____________ diversification strategy. related constrained related linked unrelated dominant

a. b. c. d.

____ 3. The purchasing of firms in the same industry is called: a. unrelated diversification. b. vertical integration. c. networking the organization. d. horizontal acquisition. ____ a. b. c. d. 4. Large diversified businesses often face what is known as the conglomerate discount. This discount means that investors understand that the financial efficiencies of this strategy automatically make these stocks worth more than their current market valuation. believe that the value of conglomerates is less than the value of the sum of their parts. increase the expected future earnings of conglomerates. have found that over time, conglomerates earn more than the component companies would have earned independently.

____ 5. Managerial motives to seek diversification include a desire to a. improve their marketability to other firms. b. effectively use corporate resources. c. provide higher returns to corporate stakeholders.
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d. increase their compensation.

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