CHAPTER EIGHT (8) Which one of the following is not one of the elements of crafting corporate strategy for

a diversified company? A. Picking the new industries to enter and deciding on the means of entry B. Initiating actions to boost the combined performance of the businesses the firm has entered C. tandardi!ing the resource fits across the group of businesses the company has diversified into ". #stablishing investment priorities and steering corporate resources into the most attractive business units #. Pursuing opportunities to leverage cross$business value chain relationships and strategic fits into competitive advantage Important reasons for a company to consider diversification include A. A desire to avoid putting all of its %eggs% in one industry basket. B. "iminishing market opportunities and stagnating sales in its principal business. C. &pportunities to leverage e'isting competencies and capabilities by e'panding into businesses where these same resource strengths are key success factors and valuable competitive assets attractive. ". an opportunity to lower costs by entering closely$related businesses and(or opportunity to transfer a powerful and well$respected brand name to the products of other businesses and thereby increase the sales and profits of these newly$entered businesses. #. All of these. )o *udge whether a particular diversification move has good potential for building added shareholder value+ the move should pass the following tests, A. B. C. ". #. the attractiveness test+ the barrier$to$entry test+ and the growth test. the strategic fit test+ the resource fit test+ and the profitability test. the barrier$to$entry test+ the growth test+ and the shareholder value test the attractiveness test+ the cost$of$entry test+ and the better$off test. the resource fit test+ the strategic fit test+ the profitability test+ and the shareholder value test.

)he better$off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves A. evaluating whether the diversification move will produce a - . - / 0 outcome such that the company1s different businesses perform better together than apart and the whole ends up being greater than the sum of the parts. B. assessing whether the diversification move will make the company better off by increasing its resource strengths and competitive capabilities. C. evaluating whether the diversification move will make the company better off by making it less sub*ect to the bargaining power of customers and(or suppliers. ". assessing whether the diversification move will make the company better off by increasing its profit margins and returns on investment. #. All of these. Which of the following is not accurate as concerns entering a new business via ac2uisition+ internal start$up+ or a *oint venture? A. )he big dilemma of entering an industry via ac2uisition of an e'isting company is whether to pay a premium price for a successful company or to buy a struggling company at a bargain price. B. Ac2uisition is generally the most profitable way to enter a new industry+ tends to be more suitable for an unrelated diversification strategy than a related diversification strategy+ and usually re2uires less capital than entering an industry via internal start$up. C. Ac2uisition is the most popular means of diversifying into another industry+ has the advantage of being 2uicker than trying to launch a brand$new operation+ and offers an effective way to hurdle entry barriers. ". 3oint ventures are an attractive way to enter new businesses when the opportunity is too comple'+ uneconomical+ or risky for one company to pursue alone+ when the opportunities in a new industry re2uire a broader range of competencies and know$how than a company can marshal on its own+ and(or when it aids entry into a foreign market. #. )he big drawbacks to entering a new industry via internal start$up include the costs of overcoming entry barriers+ building an organi!ation from the ground up+ and the e'tra time it takes to build a strong and profitable competitive position. )he defining characteristic of related diversification 4as opposed to unrelated diversification5 is A. that each business the company has diversified into are utili!ing similar competitive strategies. B. the presence of cross$business value chain relationships and strategic fits. C. that each business the company has diversified into has very similar core competencies and competitive capabilities.

". that the company has about the same number of cash cow businesses as it does cash hog businesses. #. the e'istence of cross$industry resource fits and similar key success factors from industry to industry.