SM Chapter 8
Resource Strengths/Value
A diversified firm exhibits resource fit when its businesses add to a firm's overall _____ _____ and have matching resource requirements and/or when the parent firm has adequate corporate resources to support its businesses' need and add _______
Internal Capital Market/Portfolio/Cash Cow/Cash Hog
A strong ______ ______ _____ allows a diversified firm to add value by shifting capital from business units generating free cash flow to those needing additional capital to expand and realize their growth potential A _____ approach to ensuring financial fit among a girl's businesses is based on the fact that different businesses have different cash flow and investment characteristics A _____ _____ 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 A ____ ____ business generates cash flows that are too small to fully fund its operations and growth and requires cash infusions to provide additional working capital and finance new capital investment
Growth/Industry
Diversification Timing: 1.) _______ opportunities are limited 2.) Changing ______ conditions are undermining the firm's competitive position
Technologies/Resources/Capabilities/Internal/Sharing/Brand Name
Diversification opportunities 1. Expand into businesses whose ________ and products complement present businesses 2. Employ current _______ and _______ as valuable competitive assets in other businesses 3. Reduce overall _______ costs by cross-business ______ or transfers of resources and capabilities 4. Extend strong ______ _____ to the products of other acquired businesses to help drive up sales and profits of those businesses
Internal Capital/Portfolio/Hogs/Cows/Star/Resources/Capabilities/Resources
Financial Resource Fit: -State of the ______ _____ market -Using the _______ approach: 1.) Cash _____ need cash to develop 2.) Cash ______ generate excess cash 3.) _____ businesses are self-supporting Nonfinancial resource fit: -Does the firm have (or can it develop) the specific ______ and _______ needed to be successful in each of the businesses? -Are the firm's _______ being stretched too thin by the resource requirements of one or more of its business?
No Synergy
Firm A purchases Firm B in another industry. A and B's profits are no grater than what each firm could have earned on its own (1+1=2)
Unrelated Businesses
Have dissimilar value chains and resource requirements, with no competitively important cross-business relationships at the value chain level (conglomerate)
Market/Attractive/Group
How attractive are the industries in which the firm has business operations? 1.) Does each industry represent a good ______ for the firm to be in? 2.) Which industries are most ________, and which are least? 3.) How appealing is the whole ______ of industries?
Related Businesses
Process competitively valuable cross-business value chain and resource matches (concentric)
Nine-Cell Matrix
Provides clear, strong logic for why a diversified company needs to consider both the industry attractiveness and business strength in allocating resources and investment capital to its different businesses
Profit/Growth/Strategic
Steer resources to business units with the brightest _____ and _____ prospects, attractive 9-cell positions, and solid _______ and resource fit
Existing/Internal/Joint/Existing Business Acquisition
The three ways to diversify into new businesses: 1.) ______ business acquisition 2.) _______ new venture 3.) _____ venture Which is the most popular?
