MGMT 4842 Study Guide - Startup Company, Collaborative Partnerships, Total Quality Management
Document Summary
The purpose of diversification is to build shareholder value. Whether getting into a new business has potential to enhance shareholder value hinges on whether a company"s entry into that business can pass the attractiveness test, the cost-of-entry test, and the better-off test. Entry into new businesses can take any of three forms: acquisition, internal start-up, or joint. The choice of which is best depends on the firm"s resources and capabilities, the industry"s entry barriers, the importance of speed, and the relative costs. There are two fundamental approaches to diversification into related businesses and into unrelated. Unrelated diversification strategies surrender the competitive advantage potential of strategic fit at the. 4. value chain level in return for the potential that can be realized from superior corporate parenting. An outstanding corporate parent can benefit its businesses through (1) providing high-level oversight and making available other corporate resources, (2) allocating financial resources across the business portfolio, and (3) restructuring underperforming acquisitions.
