BUSN 313 Week 5 Quiz ALL ANSWERS 100% CORRECT FALL- 2021/2022 EDITION AID GRADE A+

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves assessing whether the diversification move o will make the company better off because it will produce a greater number of core competencies. o offers potential for the company's existing businesses and new businesses to perform better together under a single corporate umbrella. o will make the company better off by spreading shareholder risks across a greater number of businesses and industries. o will make the company better off by improving its balance sheet strength and credit rating. Question 2 (10 points) Acquisition of an existing business is an attractive strategy option for entering a promising new industry because it o is an effective way to hurdle entry barriers, is usually quicker than trying to launch a new start-up operation, and allows the acquirer to move directly to the task of building a strong position in the target industry. o is more likely to result in passing the shareholder value test, the profitability test, and the better-off test. o is a less risky way of passing the attractiveness test. o is less expensive than launching a new start-up operation, thus passing the cost-of-entry test.Graded: 100% Question 3 (10 points) Which one of the following is not a factor that makes it appealing to diversify into a new industry by forming an internal start-up subsidiary to enter and compete in the target industry? o when a company possesses the skills and resources needed to compete effectively and there is ample time to launch the business. o when the industry is growing rapidly and the target industry is comprised of several relatively large and well-established firms o when internal entry is cheaper than entry via acquisition o when adding new production capacity will not adversely impact the supply/demand balance in the industry Question 4 (10 points) Which of the following is an important appeal of a related diversification strategy? o It represents an effective way of capturing valuable financial fit benefits. o It offers significant opportunities to strongly differentiate a company's product offerings from those of rivals o It offers opportunities to transfer skills, expertise, technical know-how, or other capabilities from one business to another o It is more likely to pass the cost-of-entry test and the capital gains test than unrelated diversification Question 5 (10 points) Economies of scope o arise only from strategic fit relationships in the production portions of the value chains of sister businesses. o are cost reductions that flow from cost-saving strategic fits along the value chains of related businesses in the business lineup of a multi-business corporation. o are present whenever diversification satisfies the attractiveness test and the cost-ofentry test o are more associated with unrelated diversification than related diversificationGraded: 100% Question 6 (10 points) When evaluating strategic fit benefits that related diversification can deliver, one must keep i