MGMT 4860 Ch 8 Quiz 4/5

Which of the following makes acquisition an attractive approach to diversifying into another industry? -It is quicker than trying to launch a new operation, offers an effective way to hurdle entry barriers, and allows the acquirer to move directly to the task of building a strong position in the target industry. -It is less expensive, less risky, and more effective than launching a new start-up operation. -Although it is generally more time-consuming and uncertain, it most likely allows the firm to realize great profits in the end. -It offers the prospect of gaining an immediate competitive advantage in the new industry. -It satisfies all three diversity tests (industry attractiveness test, cost-of-entry-test, better-off-test) to grow shareholder value over the long term.

It is quicker than trying to launch a new operation, offers an effective way to hurdle entry barriers, and allows the acquirer to move directly to the task of building a strong position in the target industry.

Entering a new business via a joint venture can be useful in which of the following situations?

When the opportunity is too complex, uneconomical, or risky for one company to pursue alone, a company needs a local partner to enter a foreign company, and/or a company lacks important resources or competencies that can be supplied by a partner.

A "cash cow" business

generates substantial cash surpluses over what is needed to adequately fund its operations

Diversifying into a new industry by forming a new internal subsidiary to enter and compete in the target industry is attractive when

there is ample time to launch the new business from the ground up.

Which of the following is a prime benefit of a strategy keyed to related diversification? -Related diversification passes the industry attractiveness test and thus offers the best route to 2 + 2 = 4 benefits. -Related diversification is less capital intensive and usually less risky than unrelated diversification. -Corporate parents created in related diversification can propel the company's business forward and help them to gain ground over their market rivals. -Related diversification offers ways for a firm to realize 1 + 1 = 3 benefits because the value chains of the different businesses present competitively valuable cross-business relationships. -Related diversification leads to competitive advantage and increased profitability.

WRONG - Related diversification leads to competitive advantage and increased profitability.