Diversification Merits Strong Consideration Whenever A Single-Business Company

Saturday, 6 July 2024
N Restructuring the company's business lineup and putting a whole new face on the company's business makeup. Diversification merits strong consideration. D. be prepared to make an educated guess if the available information is skimpy. Stem from the cost-saving efficiencies of operating over a wider geographic area. Diversification becomes a relevant strategic option in all but which one of the following situations? C. corporate executives are excited about market opportunities. Diversification merits strong consideration whenever a single-business company near me. D. potential for achieving somewhat more stable corporate sales and profits over the course of economic upswings and downswings (to the extent the company diversifies into businesses whose ups and downs tend to occur at different times). Companies that pursue unrelated diversification nearly always enter new businesses by acquiring an established company rather than by forming a startup subsidiary within their own corporate structures or participating in joint ventures. D. evaluating the extent of cross-business strategic fits and checking whether the firm's resources fit the needs of the various businesses the company has diversified into. In principle, diversification into a new business cannot be considered wise or justifiable unless it offers good prospects of added long-term economic value for shareholders—value that shareholders cannot capture on their own by purchasing stock in companies in different industries or investing in mutual funds or exchange-traded funds (ETFs) to spread their investments across several industries. I think our biggest achievement to date has been bringing back to life an inherent Disney synergy that enables each part of our business to draw from, build upon, and bolster the others.

Diversification Merits Strong Consideration Whenever A Single-Business Company Ltd

The costs associated with internal startup are less than the costs of buying an existing company and the company has ample time and adequate resources to launch the new internal start-up business from the ground up. B. first consider the strength of funding proposals presented by managers of each division or business unit. C. cash cow businesses with excellent financial fit. E. potential young stars is sufficient to help stars. Business units in the least attractive industries are potential candidates for divestiture, unless they are positioned strongly enough to overcome the unattractive aspects of their industry environments or they are a strategically important component of the company's business make-up. B. is less expensive than launching a new start-up operation, thus passing the cost-of-entry test. A big advantage of related diversification is that. Diversification merits strong consideration whenever a single-business company nyse. B. generates enough profits to pay off long-term debt, whereas a cash hog business does not. 0 a business unit's relative market share is, the weaker its competitive strength and market position vis-à-vis rivals.

Diversification Merits Strong Consideration Whenever A Single-Business Company Stock

Fund long-range R&D ventures aimed at opening market opportunities in new. The sum of weighted ratings across all the strength measures provides a quantitative measure of a business unit's overall competitive strength. Utilizing a well-known corporate name in a company's individual businesses has the value-adding potential both to lower brand-building and reputational costs (by spreading them over many businesses) and to enhance each business's customer value proposition by linking its products to a name that consumers trust. Management Theory Review: Corporate Diversification Strategy - Theory - Review Notes. Analyzing the attractiveness of a company's diversification strategy is a six-step process: Step 1. To be a fast follower. C. that corporate resources should be concentrated on those businesses enjoying both a higher degree of industry attractiveness and competitive strength and that businesses having low competitive strength in relatively unattractive industries should be looked at for possible divestiture.

Diversification Merits Strong Consideration Whenever A Single-Business Company Near Me

N Broadening the company's business scope by making new acquisitions in new industries. Relative market share 0. In companies committed to a strategy of unrelated diversification, astute corporate parenting plays an essential role in achieving companywide financial results above and beyond what the individual businesses could achieve as stand-alone entities. A. when a diversified company has businesses that are weakly positioned in their respective industries and are struggling to earn a decent return on investment. Conclusions about what the priorities should be for allocating resources to the various businesses of a diversified company need to be based on such considerations as. Strategic uses of corporate financial resources (see Figure 8. B. typically are prime candidates for divesture. For instance, if Business A has a market-leading share of 40 percent and its largest rival has 30 percent, A's relative market share is 1. C. the best way to build shareholder value is to acquire businesses with strong cross-business financial fit. B. evaluating the strategic fits and resource fits among the various sister businesses. E. corporate executives want to divest some businesses and retrench to a narrower diversification base. Diversification merits strong consideration whenever a single-business company portal. 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. C. volatile sales and profits and making the mistake of diversifying into too many cash cow businesses. Converting the competitive advantage potential into greater profitability fuels 1 + 1 = 3 gains in shareholder value—the necessary outcome for satisfying the better-off test and proving the business merit of a company's diversification effort.

Diversification Merits Strong Consideration Whenever A Single-Business Company Nyse

A. are typically weak performers and have the lowest claim on corporate resources. C. compare resource strengths and weaknesses, business by business. B. spreads the stockholders' risks across a group of truly diverse businesses. Are there value chain matchups that present sizable opportunities to reduce costs by combining the performance of certain value chain activities and thereby capture economies of scope? A. acquire new businesses that utilize much the same technology as existing businesses. At best, they have the lowest claim on corporate resources and often are good candidates for being divested (sold to other companies). E. rank each business unit's strategy from best to worst.

Diversification Merits Strong Consideration Whenever A Single-Business Company Portal

E. when a diversified company has businesses that have little or no strategic or resource fits with the "core" businesses that management wishes to concentrate on. The Case for Diversifying into Unrelated Businesses Whereas related diversification strategies seek to build shareholder value by diversifying only into businesses with important cross-business strategic fits, the hallmark of unrelated diversification strategies is managerial willingness to enter any industry and operate any business where company executives see opportunity to realize consistently good financial results. 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. A. underemphasizing the importance of resource fit and the strong likelihood of diversifying into businesses that top management does not know all that much about. 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. What is the company's approach to allocating investment capital and resources. A. whether the parent company's competitive advantages are being deployed to maximum advantage in each of its business units. What Does Crafting a Diversification Strategy Entail? 1 Identifying a Diversified Company's Strategy. A. transferring competitively valuable resources, expertise, technological know-how, or other capabilities from one business to another. A corporate parent's actions to help strengthen the long-term competitive positions and profitability of its individual businesses can include providing managerial expertise, funding for desirable new operating improvements and capital investments, assorted kinds of administrative support from central headquarters, and other resources that may be useful (which may include acquiring similar businesses and merging their operations into an existing business).

Diversification Merits Strong Consideration Whenever A Single-Business Company Store

Pursuing diversification requires top-level decisions about which industries to enter (and why these make good business sense) and then, for each industry, whether to enter by acquiring a company already in the target industry, internally developing its own new business in the target industry, or forming a joint venture or strategic alliance with another company. 8 The parenting activities of corporate executives often include identifying, recruiting, and hiring talented managers to run individual businesses and thereby squeeze out better business performance than otherwise might have occurred. Moves to improve a diversified company's overall performance include. In the first portion of this chapter, we describe what crafting a diversification strategy entails, when and why diversification makes good strategic sense, and the pros and cons of related versus unrelated diversification strategies. Could cost savings associated with economies of scope give one or more individual businesses a cost-based advantage over rivals? Frequently, a company pursuing related diversification has one or more businesses with competitively valuable resources, expertise, and know-how in performing certain value chain activities that are well-suited to performing closely related value chain activities in a sister business (especially a newly acquired business).

Diversification Merits Strong Consideration Whenever A Single-Business Company Reported

Competitively valuable opportunities for technology or skills transfer, cost reduction, common brand-name usage, and cross-business collaboration exist at one or more points along the value chains of business A and business B. When a company spots opportunities to expand into industries whose technologies and products complement its present business. Are the parent company's resources and capabilities being stretched too thinly by the resource/capability requirements of one or more of its businesses? D. when businesses in once-attractive industries have badly deteriorated. 0 increases, there's reason to question whether the company can perform well with so many businesses in relatively weak competitive positions. C. discounts the importance of strategic fit and instead focuses on building and managing a group of businesses in attractive industries that can acquired on financial terms that allow for acceptable returns on investment. A business unit's relative market share is defined as the ratio of its market share to the market share held by the largest rival firm in the industry, with market share measured in unit volume, not dollars. A. company's profits are being squeezed, and it needs to increase its net profit margins and return on investment. Develop and nurture outstanding corporate parenting capabilities.

Evaluate the competitive value of cross-business strategic fits. B. scrutinizing each industry/business to determine where driving forces are strongest/weakest and how many profitable strategic groups the company has diversified into. D. encounters declining profits in its mainstay business.