Chapter 7 DQs and Responses

Chapter 7 DQs and Responses - Chapter 7 DQs and Responses...

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Chapter 7 DQs and Responses 1. How does horizontal growth differ from vertical growth as a corporate strategy? from concentric diversification? Students often confuse these three strategies. Horizontal growth is the expanding of a firm's activities into other geographic regions and/or by increasing the range of products and services offered to current markets. It often involves the acquisition of another firm in the same industry (an example of external growth), but it could also be through the expansion of a firm's products in its current markets (e.g., through line extensions) or expansion into another geographic region (an example of internal growth). One example of external horizontal integration would be if Anheuser-Busch bought Coors. An internal example was Coors' expansion into the eastern U.S. Vertical growth , in contrast, involves a firm's taking over a function previously performed by a supplier or a distributor. This would typically involve the addition of activities in other industries either forward (downstream) or backward (upstream) on the industry value chain of current products or services. The additions are primary justified in terms of support of the current product lines regardless of their being in other industries (and thus can be argued to be diversification). Concentric diversification , in contrast, is the addition of products or divisions which are related to the corporation's main business, but are added because of the attractiveness of other industries rather than because they support the activities of the current product lines. The additions may be through acquisition or through internal development. The firm buys or develops another division which is similar to its present product-line. Anheuser- Busch's diversification into snack foods (Eagle Snacks) to complement its line of beers was an example of concentric diversification. The products are not alike, but have a "common thread" relating them. If Coca Cola bought PepsiCo, it would be an example of horizontal integration. If it purchased its distributors, this would be an example of forward vertical integration. Its acquisition of Taylor Wines, however, was an example of concentric
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Chapter 7 DQs and Responses - Chapter 7 DQs and Responses...

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