In terms of strategy making, what is the difference between a one-business company and a diversified company?

The first uses a business-level strategy, while the second uses a set of business strategies and a corporate strategy

The decision to pursue diversification requires management to resolve which industries to enter and whether to enter, and includes such decisions as the following, EXCEPT:

selecting the appropriate value chain operating practices to improve the financial outlook.

Diversification merits strong consideration whenever a single-business company

is faced with diminishing market opportunities and stagnating sales in its principal business.

Diversification ought to be considered when

a company begins to encounter diminishing growth prospects in its mainstay business

To create value for shareholders via diversification, a company must

diversify into businesses that can perform better under a single corporate umbrella than they could perform operating as independent, stand-alone businesses.

The cost-of-entry test for evaluating whether diversification into a particular industry is likely to build shareholder value involves

considering whether a company's costs to enter the target industry are low enough to allow for good profits or so high that potential profits would be eroded.

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves

evaluating whether the diversification move will produce a 1 + 1 = 3 outcome such that the company's different businesses perform better together than apart and the whole ends up being greater than the sum of the parts.

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MAN4900F

Ch 8

Question	Answer
In terms of strategy making, what is the difference between a one-business company and a diversified company?	The first uses a business-level strategy, while the second uses a set of business strategies and a corporate strategy
The task of crafting corporate strategy for a diversified company encompasses	All of these
The decision to pursue diversification requires management to resolve which industries to enter and whether to enter, and includes such decisions as the following, EXCEPT:	selecting the appropriate value chain operating practices to improve the financial outlook.
Diversification merits strong consideration whenever a single-business company	is faced with diminishing market opportunities and stagnating sales in its principal business.
Diversification ought to be considered when	a company begins to encounter diminishing growth prospects in its mainstay business
Creating added value for shareholders via diversification requires building a multibusiness company where the whole is greater than the sum of the parts—an outcome known as:	synergy outcome.
Diversifying into new businesses is justifiable only if it	builds shareholder value.
To create value for shareholders via diversification, a company must	diversify into businesses that can perform better under a single corporate umbrella than they could perform operating as independent, stand-alone businesses.
The cost-of-entry test for evaluating whether diversification into a particular industry is likely to build shareholder value involves	considering whether a company's costs to enter the target industry are low enough to allow for good profits or so high that potential profits would be eroded.
The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves	evaluating whether the diversification move will produce a 1 + 1 = 3 outcome such that the company's different businesses perform better together than apart and the whole ends up being greater than the sum of the parts.

Created by: 165714117159216

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