Which of the following is not accurate as concerns entering a new business via acquisition, internal start-up, or a joint venture? The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involvesĮvaluating 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.Īssessing whether the diversification move will make the company better off by increasing its resource strengths and competitive capabilities.Įvaluating whether the diversification move will make the company better off by making it less subject to the bargaining power of customers and/or suppliers.Īssessing whether the diversification move will make the company better off by increasing its profit margins and returns on investment. The resource fit test, the strategic fit test, the profitability test, and the shareholder value test. The attractiveness test, the cost-of-entry test, and the better-off test. The barrier-to-entry test, the growth test, and the shareholder value test. The strategic fit test, the resource fit test, and the profitability test. The attractiveness test, the barrier-to-entry test, and the growth test. To judge whether a particular diversification move has good potential for building added shareholder value, the move should pass the following tests: When can leverage its collection of resources and capabilities by expanding into businesses where these resources and capabilities are valuable assets.
When diversifying into additional businesses opens new avenues for reducing costs via cross-business sharing or transfer of competitively valuable resources and capabilities. When it has a powerful and well-known brand name that can be transferred to the products of other businesses and thereby used as a lever for driving up the sales and profits of such business.
When it spots opportunities for expanding into industries whose technologies and products complement its present business. A company becomes a prime candidate for diversifying under the following circumstances _
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