A) identifying which businesses have strategies that should be continued, which business have strategies that need fine-tuning, and which businesses have strategies that need major overhaul.
B) that businesses having the greatest competitive strength and positioned in the most attractive industries should have the highest priority for corporate resource allocation and that competitively weak businesses in relatively unattractive industries should have the lowest priority and perhaps even be considered for divestiture.
C) pinpointing what strategies are most appropriate for businesses positioned in the four corners of the matrix (although the matrix reveals little about the best strategies for businesses positioned in the remainder of the matrix) .
D) its ability to pinpoint what kind of competitive advantage or disadvantage each business has.
E) pinpointing which businesses to keep and which ones to divest.
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A) the main basis for competitive advantage and improved shareholder value is increased ability to achieve economies of scope.
B) each business is on its own in trying to build a competitive edge and the consolidated performance of the businesses is likely to be no better than the sum of what the individual businesses could achieve if they were independent.
C) there is a strong chance that the combined competitive advantages of the various businesses will produce a 1 + 1 = 3 performance outcome as opposed to just a 1 + 1 = 2 performance outcome.
D) the main basis for improved shareholder value is strong cross-business financial fits.
E) the main basis for improved shareholder value is increased ability to achieve economies of scale in the businesses it has entered.
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A) is usually the most attractive long-run strategy for a broadly diversified company confronted with recession, high interest rates, mounting competitive pressures in several of its businesses, and sluggish growth.
B) has the advantage of focusing a diversified firm's energies on building strong positions in a few core businesses rather the stretching its resources and managerial attention too thinly across many businesses.
C) is an attractive strategy option for revamping a diverse business lineup that lacks strong cross-business financial fit.
D) is sometimes an attractive option for deepening a diversified company's technological expertise and supporting a faster rate of product innovation.
E) is a strategy best reserved for companies in poor financial shape.
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A) opportunities to combine the performance of certain cross-business activities and thereby reduce costs.
B) opportunities to transfer skills, technology, or intellectual capital from one business to another.
C) opportunities for the company's different businesses to share use of a well-respected brand name.
D) opportunities for sister businesses to collaborate in creating valuable new competitive capabilities.
E) All of these.
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A) a company's profits are being squeezed and it needs to increase its net profit margins and return on investment.
B) a company lacks sustainable competitive advantage in its present business.
C) a company begins to encounter diminishing growth prospects in its mainstay business.
D) a company has run out of ways to achieve a distinctive competence in its present business.
E) a company is under the gun to create a more attractive and cost-efficient value chain.
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A) involve making radical changes in a diversified company's business lineup, divesting some businesses and acquiring new ones so as to put a new face on the company's business lineup.
B) entails reducing the scope of diversification to a smaller number of businesses.
C) entail selling off marginal businesses to free up resources for redeployment to the remaining businesses.
D) focus on crafting initiatives to restore a diversified company's money-losing businesses to profitability.
E) focus on broadening the scope of diversification to include a larger number of businesses and boost the company's growth and profitability.
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A) the profit test, the competitive strength test, the industry attractiveness test, and the capital gains test.
B) the better-off test, the competitive advantage test, the profit expectations test, and the shareholder value test.
C) the barrier to entry test, the competitive advantage test, the growth test, and the stock price effect test.
D) the strategic fit test, the industry attractiveness test, the growth test, the dividend effect test, and the capital gains test.
E) the attractiveness test, the cost of entry test, and the better-off test.
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A) the extent to which the firm is broadly or narrowly diversified, whether it is pursuing related or unrelated diversification (or a mixture of both) , and the recent moves it has made to divest businesses, acquire new businesses, and strengthen the positions of existing businesses.
B) whether the company is focusing on "milking its cash cows" or "feeding its cash hogs."
C) the technological proficiencies, labor skill requirements, and functional area strategies characterizing each of the firm's businesses.
D) each business's competitive approach-whether it is pursuing a low-cost leadership, differentiation, best-cost, focused differentiation, or focused low-cost strategy.
E) whether it is emphasizing the pursuit of economies of scale or economies of scope.
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A) Businesses with high industry attractiveness ratings should be given top priority and those with low industry attractiveness ratings should be given low priority.
B) Business subsidiaries with the brightest profit and growth prospects and solid strategic and resource fits generally should head the list for corporate resource support.
C) The positions of each business in the nine-cell attractiveness-strength matrix should govern resource allocation.
D) Businesses with the most strategic and resource fits should be given top priority and those with the fewest strategic and resource fits should be given low priority.
E) Businesses with high competitive strength ratings should be given top priority and those with low competitive strength ratings should be given low priority.
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a) The attractiveness test in relation t...View Answer
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A) broadening the company's business scope by making new acquisitions in new industries.
B) divesting weak-performing businesses and retrenching to a narrower base of business operations.
C) restructuring the company's business lineup with a combination of divestitures and new acquisitions to put a whole new face on the company's business makeup.
D) pursuing growth opportunities within the existing business lineup.
E) All of these.
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E
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Related diversification and unrelated diversification are two different strategies that a company can use to expand its business.
Related diversification involves entering into new businesses that are related to the company's existing products or services. This can be achieved through vertical integration, where the company expands into different stages of the same industry's value chain, or through horizontal integration, where the company expands into related industries. The goal of related diversification is to leverage the company's existing capabilities, resources, and core competencies to create synergies and competitive advantages in the new businesses. For example, a company that manufactures smartphones may diversify into the production of accessories such as cases and screen protectors.
On the other hand, unrelated diversification involves entering into new businesses that have no direct connection to the company's existing products or services. This can be achieved through acquiring or starting businesses in completely different industries. The goal of unrelated diversification is to spread the company's risk across different industries and to capitalize on opportunities in industries where the company has no previous experience. For example, a company that manufactures automobiles may diversify into the hospitality industry by acquiring a hotel chain.
In summary, the main difference between related diversification and unrelated diversification lies in the degree of connection between the new businesses and the company's existing products or services. Related diversification seeks to build on existing capabilities and resources, while unrelated diversification seeks to explore new opportunities in unrelated industries. Both strategies have their own advantages and challenges, and the choice between the two depends on the company's specific circumstances and objectives.
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A) Deciding on the appropriate weights for the attractiveness measures.
B) Different analysts use different weights for the different attractiveness measures.
C) Gaining sufficient command of the industry to assign more accurate and objective ratings.
D) None of these.
E) All of these.
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A) the resource requirements of each business exactly match the resources the company has available.
B) individual businesses add to a company's resource strengths and when a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin.
C) each business generates just enough cash flow annually to fund its own capital requirements and thus does not require cash infusions from the corporate parent.
D) each business unit produces sufficient cash flows over and above what is needed to build and maintain the business, thereby providing the parent company with enough cash to pay shareholders a generous and steadily increasing dividend.
E) there are enough cash cow businesses to support the capital requirements of the cash hog businesses.
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B
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A) market size and projected growth rate.
B) emerging opportunities and threats, the intensity of competition, and the degree of industry uncertainty and business risk.
C) resource requirements and the presence of cross-industry strategic fits.
D) seasonal and cyclical factors, industry profitability, and whether an industry has significant social, political, regulatory, and environmental problems.
E) All of these.
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A) is aimed at achieving good financial fit (whereas related diversification aims at good strategic fit) .
B) is the best way for a company to pass the attractiveness test in choosing which types of businesses/industries to enter.
C) discounts the importance of strategic fit benefits and instead focuses on building and managing a group of businesses capable of delivering good financial performance irrespective of the industries these businesses are in.
D) concentrates on diversifying into businesses where a company can leverage use of a well-known brand name in ways that create added value for shareholders.
E) generally offers more competitive advantage potential than related diversification.
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A) underemphasizing the importance of resource fit and the strong likelihood of diversifying into businesses that top management does not know all that much about.
B) insufficient cash flows to finance so many different lines of business and a lack of uniformity among the strategies of the businesses it has diversified into.
C) volatile sales and profits and making the mistake of diversifying into too many cash cow businesses.
D) the difficulties of competently managing many different businesses and being without the added source of competitive advantage that cross-business strategic fit provides.
E) over-investing in the achievement of economies of scope and the difficulties of achieving a good mix of cash cow and cash hog businesses.
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A) generates unusually high profits and returns on equity investment.
B) is so profitable that it has no long-term debt.
C) generates positive cash flows over and above its internal requirements, thus providing a corporate parent with cash flows that can be used for financing new acquisitions, investing in cash hog businesses, and/or paying dividends.
D) is a business with such a strong competitive advantage that it generates big profits, big returns on investment, and big cash surpluses after dividends are paid.
E) has good strategic fit with a cash hog business.
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A) Does the company have all of the resources and capabilities it requires to enter the business through internal development or is it lacking some critical resources?
B) Are there entry barriers to overcome?
C) Is speed an important factor in the firm's chances for successful entry?
D) Which is the least costly mode of entry, given the company's objectives?
E) All of these.
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