The Coca-Cola Corporation replaces its old diet cola drink (Tab) with a new diet cola drink called Diet Coke.

Consider the following list of strategies. In your view, which are examples of potential economies of scope underlying a corporate diversification strategy? For those strategies that are an economy of scope, which economy of scope are they? For those strategies which aren’t an economy of scope, why aren’t they? (Note: the book lists five types of economies of scope: (1) shared activities as an EOS, (2) core competencies as an EOS (including shared business-level competencies and corporate level competencies), (3) financial economies of scope (including internal capital allocation, risk reduction, and tax advantages), (4) anticompetitive economies of scope (including multipoint competition and exploiting market power), and (5) maximizing management compensation.)

a. The Coca-Cola Corporation replaces its old diet cola drink (Tab) with a new diet cola drink called Diet Coke.

b. Apple introduces an iPhone with a larger memory.

c. PepsiCo distributes Lay’s Potato Chips to the same stores where it sells Pepsi.

d. Wal-Mart uses the same distribution system to supply its Wal-Mart stores, its Supercenters, and its Sam’s Clubs.

e. HeadSki company introduces a new line of tennis rackets.

f. General Electric borrows money from Bank of America at 3% interest and then makes capital available to its jet engine subsidiary at 8% interest.

g. McDonald’s acquires Boston Market and Chipotle (two restaurants where many customers sit in the restaurant to eat their meals).

h. A venture capital firm invests in a firm in the biotechnology industry and a firm in the entertainment industry.

I. Another VC firm invests in two firms in the biotechnology industry.

 

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