Corporate restructuring strategies
involve making radical changes in a diversified company's business lineup, divesting some businesses and acquiring new ones so as to put a new face on the company's business lineup.
To produce added long-term shareholder value, a move to diversify into a new business must pass three tests:
the better-off test, the cost-of-entry test, and the industry attractiveness test.
Retrenching to a narrower diversification base
is directed at improving long-term performance by building stronger positions in a smaller number of core businesses.
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.
Which of the following is a prime benefit of a strategy keyed to related diversification?
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.
The drawbacks of an unrelated diversification strategy include
very demanding managerial requirements and limited competitive advantage potential
Checking a diversified firm's business portfolio for the competitive advantage potential of cross-business strategic fit entails consideration of
the extent to which there are competitively valuable relationships between the value chains of sister business units and what opportunities they present to reduce costs, share use of a potent brand name, or transfer skills or technology or intellectual ca
The procedure for evaluating a diversified company's strategy involves all of the following steps except
applying the industry attractiveness test, the cost-of-entry test, and the better-off test.
Which of the following are key indicators of industry attractiveness?
Emerging opportunities and threats, the presence of cross-industry strategic fit, and seasonal and cyclical factors.
What is the benefit of calculating quantitative attractiveness ratings for the industries a diversified company has invested in?
Calculating attractiveness ratings is a systematic and reasonably reliable method for ranking a diversified company's industries from most to least attractive.
Relative market share as a measure of competitive strength is calculated by
dividing the business's percentage share of total industry sales volume by the percentage share held by its largest rival�it is a better indicator of a business's competitive strength than is a simple percentage measure of market share.
Checking the competitive advantage potential of cross-business strategic fit involves
evaluating how much benefit a diversified company can gain from cross-business value chain matchups and resource sharing
A "cash hog" type of business
generates cash flows that are too small to fully fund its operations and growth.
The financial options for allocating a diversified company's financial resources include
repurchasing shares of the company's common stock
Which of the following is not a strategic option for a company that is already diversified?
Repurchasing shares of the company's common stock and building cash reserves by investing in short-term securities.