Whenever a single-business company is faced with diminishing market. In this chapter, we move up one level in the strategy-making hierarchy, from strategy making in a single-business enterprise to strategy making in a diversified enterprise. C. A producer of canned soups acquiring a maker of breakfast cereals. Management Theory Review: Corporate Diversification Strategy - Theory - Review Notes. Chapter 8 • Diversification Strategies 186. n Ability to exercise bargaining leverage with key suppliers or customers. Is this content inappropriate? D. the firm has no prior experience with diversification and the industry is on the verge of explosive growth.
- Diversification merits strong consideration whenever a single-business company stock
- Diversification merits strong consideration whenever a single-business company near me
- Diversification merits strong consideration whenever a single-business company info
- Diversification merits strong consideration whenever a single-business company based
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Diversification Merits Strong Consideration Whenever A Single-Business Company Stock
A. making acquisitions to establish positions in new businesses or to complement existing businesses. There's ample room for companies to customize their diversification strategies to incorporate elements of both related and unrelated diversification, as may suit their own collection of valuable competitive assets, corporate resources, and strategic vision. A. the difficulties of passing the cost-of-entry test and the ease with which top managers can make the mistake of diversifying into businesses where competition is too intense. E. the firm has not built up a hoard of cash with which to finance a diversification effort. Rating scale: 1 = Very weak; 10 = Very strong]. Step 3: Evaluating the Competitive Value of Cross-Business Strategic Fits While this step can be bypassed for diversified companies whose businesses are all unrelated (since, by design, no strategic fits a re p resent), the presence of important s trategic fi ts ac ross the va lue chains of a company's related businesses is central to concluding just how good a company's related diversification strategy is. The most important strategy-making guidance that comes from drawing a Nine-Cell Industry Attractiveness-Competitive Strength Matrix is. E. always make the company's business units with strong resource strengths and competitive capabilities the central focus of funding initiatives. Diversification merits strong consideration whenever a single-business company info. A company pursuing a related diversification strategy would likely address the issue of what additional industries/businesses to diversify into by. E. is one that has more current liabilities than current assets and faces a liquidity crisis due to declining sales revenues and declining profitability. Having bargaining leverage signals competitive strength and can be a source of competitive advantage. C. generates negative cash flows from internal operations and thus requires cash infusions from its corporate parent to report a profit. E. the resource requirements of each business exactly match the company's available resources. B. enable a company to achieve rapid or continuous growth.
Chapter 8 • Diversification Strategies 175. n Exploiting use of a well-known and potent brand name. It can offer opportunities for reducing costs and for leveraging use of a competitively powerful brand name. A. results in increased profit margins and bigger total profits. E. identify potential new acquisition candidates that are cash cows (as opposed to cash hogs). Diversification merits strong consideration whenever a single-business company based. Chapter 8 • Diversification Strategies 198. Usually, expansion into new businesses is undertaken by acquiring companies already in the target industry. D. The strategic fit test, the industry attractiveness test, the growth test, the dividend effect test and the capital gains test.
Diversification Merits Strong Consideration Whenever A Single-Business Company Near Me
Competitive advantage. 40 Sum of importance weights 1. The Two Big Drawbacks of Unrelated Diversification Unrelated diversification strategies have two important negatives: 1. C. Stem from cost-saving strategic fits along the value chains of related businesses. C. entail selling off marginal businesses to free resources for redeployment to the remaining businesses. Diversification merits strong consideration whenever a single-business company stock. The only time a business unit's competitive strength may not be undermined by having higher costs than rivals is when it has incurred the higher costs to strongly differentiate its product offering and its customers are willing to pay premium prices for the differentiating features. A diversified company must guard against overtaxing its resources and capabilities, a condition that can arise when (1) it goes on an acquisition spree and management is called upon to assimilate and oversee many new businesses quickly or (2) it lacks sufficient supplies of competitively valuable resources and capabilities that it can transfer from one or more existing business to bolster the competitiveness of resource-deficient businesses. To test whether a particular diversification move has good prospects for creating added shareholder value, corporate strategists should use the. Assessing the attractiveness of the industries the company has diversified into, both individually and as a group. Which one is not relevant?
B. provide a quantitative measure of the overall market strength and competitive standing for each business unit. Are the corporate parent's resources and parenting capabilities poorly matched to the resource requirements of one or more businesses it has diversified into? Restructuring is also undertaken when a newly appointed CEO decides to redirect the company. The sum of weighted ratings across all the strength measures provides a quantitative measure of a business unit's overall competitive strength. Since the owners of a successful and growing company usually demand a price that reflects their business's profit prospects, it's easy for the acquisitions of well positioned and/ or attractively profitable companies to fail the cost-of-entry test.
Diversification Merits Strong Consideration Whenever A Single-Business Company Info
E. which businesses are in industries with profitable value chains and which are in industries with money-losing value chains. There is a small pool of desirable acquisition candidates. The absence of shared values and cultural compatibility between the medical research and chemical-compounding expertise of the pharmaceutical companies and the fashion/ marketing orientation of the cosmetics business was the undoing of what otherwise was diversification into businesses with technology-sharing potential, product development fit, and some overlap in distribution channels. B. the products of the different businesses are not bought by the same types of buyers or sold in the same types of retail stores. But in every case, a decision to diversify must start with good economic and business justification for doing so. Restructuring a Company's Business Lineup Restructuring involves divesting some businesses and acquiring others to put a whole new face on the company's business lineup. As a rule, all the industries represented in a diversified company's business portfolio should be judged on such attractiveness factors as.
In announcing the restructuring, Kraft's CEO said the two companies "will each benefit from standing on its own and focusing on its unique drivers for success…each will have the leadership, resources, and mandate to realize its full potential. C. shareholders will view the contemplated diversification move as attractive. E. overinvesting in the achievement of economies of scope and the difficulties of achieving a good mix of cash cow and cash hog businesses. B. insufficient cash flows to finance so many different lines of business and a lack of uniformity among the strategies of the businesses the company has diversified into. E. anywhere along the respective value chains of related businesses; no one place is best. This can involve shifting funds from businesses with excess cash (more than needed to fund their operating requirements) to cash-short businesses with appealing growth opportunities. Copyright © 2020 by Arthur A. Thompson.
Diversification Merits Strong Consideration Whenever A Single-Business Company Based
E. expand into foreign markets where the firm currently does no business. A fourth, and often important, motivating factor for adding new businesses is to complement and strengthen the market position and competitive capabilities of one or more of its present businesses. 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. Step 5: Ranking the Performance Prospects of Business Units and Assigning a Priority for Resource Allocation Once a diversified company's businesses are evaluated from the standpoints of industry attractiveness, competitive strength, strategic fit, and resource fit, the next step is to use this information to rank the performance prospects of the businesses from best to worst. CORE CONCEPT Strategic fit exists when the value chains of different businesses present opportunities for crossbusiness resource transfer, lower costs through combining the performance of related value chain activities, crossbusiness use of a potent brand name, and/or crossbusiness collaboration to build new or stronger resources and capabilities that can enhance the competitive ness of one or more of the company's businesses. A. which industries appear to be the most and least attractive from the standpoint of the company's long-term performance. Are insufficient to diversify.
Only in businesses whose products/services satisfy the same general types of buyer needs and preferences. N The presence of cross-industry strategic fits. Which of the following is not a major consideration in evaluating the pluses and minuses of a diversified company's strategy? Building the acquired firm's earnings from $200, 000 to $600, 000 annually could take several years—and require additional investment on which the purchaser would also have to earn a 20 percent return. It is less capital intensive and usually more profitable than unrelated diversification. CORE CONCEPT A strategy of multinational diversification into related businesses has more builtin potential for competitive advantage than any other diversification strategy. E. initiating actions to boost the combined performance of the businesses the firm has entered. Being able to attract bargain-hunting shoppers by selling the company's merchandise online at lower prices than in traditional retail stores.
However, there are four other instances in which a company becomes a prime candidate for diversifying:1. n When it spots opportunities for expanding into industries whose technologies and/or products complement its present business. B. increasing dividend payments to shareholders and/or repurchasing shares of the company's stock. B. generates enough profits to pay off long-term debt, whereas a cash hog business does not.
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