Diversification Merits Strong Consideration Whenever A Single-Business Company Ltd

A second is the potential for transferring resources and capabilities from existing businesses to newly-acquired related or complementary businesses. If A and B's consolidated profits in the years to come prove no greater than what each could have earned on its own, then A's diversification won't provide its shareholders with added value. A. Management Theory Review: Corporate Diversification Strategy - Theory - Review Notes. is one that is losing money and requires cash infusions from its corporate parent to continue operations. Using a Nine-Cell Matrix to Simultaneously Portray Industry Attractiveness and Competitive Strength The industry attractiveness and competitive strength scores can be used to portray the strategic positions of each business in a diversified company. Screening acquisition candidates and evaluating the pros and cons or keeping or divesting existing businesses.

1. Diversification merits strong consideration whenever a single-business company ltd
2. Diversification merits strong consideration whenever a single-business company nyse
3. Diversification merits strong consideration whenever a single-business company india

Diversification Merits Strong Consideration Whenever A Single-Business Company Ltd

D. Whether to employ a forward integration strategy. C. multibusiness enterprise. Which of the following statements about cross-business strategic fit in a diversified enterprise is not accurate? B. a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin and when individual businesses add to a company's overall strengths. The basic premise of unrelated diversification is that any business that has good profit prospects and can be acquired on good financial terms is a good business to diversify into. As businesses are divested, corporate restructuring generally involves aligning the remaining business units into groups with the best strategic fits and then redeploying the cash flows from the divested businesses to either pay down debt or make new acquisitions to strengthen the parent company's business position in the industries it has chosen to emphasize. Diversification merits strong consideration whenever a single-business company india. All four types of actions to capture strategic fit opportunities along the value chains of related businesses tend to produce synergistic outcomes: improved competitiveness of one or more businesses and greater ability to perform better as sister businesses than as stand-alone businesses. 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. Unrelated diversification certainly merits consideration when a firm is trapped in or overly dependent on an endangered or unattractive industry, especially when it has no competitively valuable resources or capabilities it can transfer to a closely related industry.

B. generates cash flows that are too small to fully fund its operations and growth, and so must receive cash infusions from outside sources to cover working capital and investment requirements. 20 relative market share), but a 10 percent share is actually strong if the leader's share is only 12 percent (a 0. B. company lacks sustainable competitive advantage in its present business. D. using the results of the prior analytical steps as a basis for crafting new strategic moves to improve the company's overall performance. Diversification merits strong consideration whenever a single-business company nyse. Document Information. 0 a business unit's relative market share is, the weaker its competitive strength and market position vis-à-vis rivals. Diversifying into new businesses can be considered a success only if it. Simple arithmetic requires that the profits be tripled if the purchaser (paying $3 million) is to earn the same 20 percent return. Acquiring a company already operating in the target industry, creating a new subsidiary internally to compete in the target industry or forming a joint venture with another company to enter the target industry. N An excessive debt burden with interest costs that eat deeply into profitability.

Corporate brands that can be applied and shared in this fashion are sometimes called umbrella brands. There are many companies that concentrated on a single business and achieved enviable business success over many decades - good examples include McDonald's, Southwest Airlines, Domino's Pizza, Wal-Mart, FedEx, Hershey, Timex, and Ford Motor Company. C. the best way to build shareholder value is to acquire businesses with strong cross-business financial fit. For a company to make the best use of its limited pool of resources, both financial and nonfinancial, top executives must be diligent in steering resources to those businesses with the best opportunities and performance prospects, and allocating only minimal resources to businesses with weak prospects. Diversification merits strong consideration whenever a single-business company ltd. D. which industries are most attractive from the standpoint of long-term growth and the growth prospects of all the industries as a group. D. It is more likely to pass the cost-of-entry test and the capital gains test than unrelated diversification. Avoiding the extra costs associated with operating Web site e-stores.

Diversification Merits Strong Consideration Whenever A Single-Business Company Nyse

The second company, named Mondelēz International, included all of the former company's global snack brands (Oreo, Cadbury, Nabisco, Philadelphia cream cheeses, Ritz, Triscuit, and Wheat Thins, among many others). Good industry attractiveness also requires good opportunities for long-term growth. C. a lineup containing too many competitively weak 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. Sometimes a company acquires businesses that, down the road, just do not work out as expected even though management has tried all it can think of to make them profitable—mistakes cannot be completely avoided because it is hard to foresee how getting into a new line of business will actually work out. "19 When the answer is no or probably not, divestiture should be considered. D. paying down existing debt, increasing dividends, or repurchasing shares of the company's stock. Think of diversification as a strategy. Of cross-business value chain. Industry attractiveness is plotted on the vertical axis, and competitive strength on the horizontal axis. Chapter 8 • Diversification Strategies 172. n When diversifying into closely related businesses opens new avenues for reducing costs. D. The strategic fit test, the industry attractiveness test, the growth test, the dividend effect test and the capital gains test. D. when businesses in once-attractive industries have badly deteriorated.

D. Whether it will perform order fulfillment activities internally or outsource them. 50 Social, political, regulatory, and environmental factors 0. Open new avenues for reducing costs. C. the appeal of its strategy, relative number of competitive capabilities, the number of products in each businesses product line, which businesses have the highest/lowest market shares, and which businesses earn the highest/lowest profits before taxes. Are the parent company's resources and capabilities being stretched too thinly by the resource/capability requirements of one or more of its businesses? Analyzing how good a company's diversification strategy is a six-step process: Step 1: Evaluate the long-term attractiveness of the industries into which the firm has diversified. Technological change is rapid and following rivals find it easy to leapfrog the pioneer with next-generation products of their own. E. all of these choices are correct. Answer: The correct answer is B. E. the production methods that they employ both entail economies of scale. Demanding managerial requirements.

One of the biggest Internet-related strategic issues facing many businesses is. D. To be the last-mover—playing catch-up is usually fairly easily and nearly always much cheaper than any other option. The locations of the business units on the attractiveness–strength matrix provide valuable guidance in deploying corporate resources to the various business units. B. has a clear path to achieving 1 + 1 = 3 synergy gains in shareholder value. To be a fast follower. C. Added ability to interest potential buyers in purchasing the company's products. Technologies and products complement its present business. Could cost savings associated with economies of scope give one or more individual businesses a cost-based advantage over rivals? B. is so profitable that it has no long-term debt. Production Advertising. Are the first to bell the cat in that area. Develop and nurture outstanding corporate parenting capabilities.

Diversification Merits Strong Consideration Whenever A Single-Business Company India

However, there are occasions when a business located in the three lower right cells generates sizable positive cash flows or has other traits with important strategic value that justify its retention. You're Reading a Free Preview. B. companies are seeking multinational diversification. But, as a practical matter, a company's resources are limited. The big appeal of related diversification is to build shareholder value by leveraging these cross-business relationships into competitive advantage, thus allowing the company as a whole to perform better than just the sum of its individual businesses. A. which businesses in the portfolio have the most potential for strategic fit and resource fit. Two, the capture of cross-business strategic-fit benefits is possible only via a strategy of related diversification. 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. It is best to be a fast follower rather than a first mover or a slow mover.

CORE CONCEPT A cash cow business generates cash flows over and above its internal requirements, thus providing a corporate parent with funds for investing in cash hog businesses, financing new acquisitions, or paying dividends. E. offers the prospect of gaining an immediate competitive advantage in the new industry and thus helps ensure that the diversification move will pass the competitive advantage test for building shareholder value. 4 billion and realized a net cash flow from operations of $43. Rather, the normal procedure is to delegate lead responsibility for business strategy to the heads of each business, giving them the latitude to develop strategies suited to the particular industry and competitive circumstances in which their business operates, and holding them accountable for producing good financial and strategic results. One important test of financial resource fit involves determining whether a company has ample cash cows and not too many cash hogs. C. the products of the different businesses are sold in the same types of retail stores. A. picking new industries to enter and deciding on the means of entry. Build positions in new. D. Diversification cannot be considered a success unless it results in added shareholder value—value that shareholders cannot capture for themselves by spreading their investments across the stocks of companies in different industries. Unrelated businesses have dissimilar value chains containing no competitively useful cross business relationships.

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. When calculating industry attractiveness scores, to produce a valid response it is necessary to.

Thu, 23 May 2024 05:40:51 +0000