What is an advantage of unrelated diversification quizlet?
An advantage of unrelated diversification is that competencies can be shared and leveraged throughout the value chain activities.
Unrelated Diversification —Diversifying into new industries, such as Amazon entering the grocery store business with its purchase of Whole Foods. Geographic Diversification —Operating in various geographic markets, which is the corporate strategy of Starbucks, Target, and KFC.
* Corresponding Author. A company is diversified when it is in two or more lines of business. Companies pursue unrelated diversification strategy when they enter into a new activity that has no obvious similarities with any of the company's existing activities.
One of the key advantages of related diversification is the ability to share key resources across different areas. Key resources and capabilities of the firm can be utilized in a new area – potentially giving the firm a competitive advantage relative to other firms that may not pose comparable resources.
The benefits of unrelated diversification are rooted in two conditions: (1) increased efficiency in cash management and in allocation of investment capital and (2) the capability to call on profitable, low-growth businesses to provide the cash flow for high-growth businesses that require significant infusions of cash.
Unrelated diversification can create value through two types of financial economies: efficient internal capital market allocation and restricting a firm's assets.
How does a conglomerate benefit from following an unrelated diversification strategy? the conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.
Which of the following is the best example of unrelated diversification? A producer of mens apparel acquiring a maker of golf equipment.
Unrelated diversification: When a firm enters an industry that lacks any important similarities with the firm's existing industry or industries.
An advantage of unrelated diversification is that competencies can be shared and leveraged throughout the value chain activities. 15. An appropriate reason to diversify is to pool the risk from several business ventures in order to create a more stable income stream.
Which of the following may be true for a company pursuing a strategy of unrelated diversification rather than a strategy of related diversification?
Which of the following may be true for a company pursuing a strategy of unrelated diversification rather than a strategy of related diversification? The company has superior strategic management and organizational design.
Which of the following is an advantage of pursuing an unrelated diversification strategy over a related diversification strategy? The company doesn't need coordination between business units.
The two biggest drawbacks or disadvantages of unrelated diversification are: A. the difficulties of passing the cost-of-entry test and the ease with which top managers can make the mistake of diversifying into businesses where competition is too intense.
Diversification is a risk-reduction strategy used by businesses to help expand into new markets and industries and achieve greater profitability. This can be attained by diversifying new products and services in new markets, targeting new customers and increasing profitability.
Related diversification occurs when a firm moves into a new industry that has important similarities with the firm's existing industry or industries. Because films and television are both aspects of entertainment, Disney's purchase of ABC is an example of related diversification.
How does a conglomerate benefit from following an unrelated diversification strategy? The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.
Another disadvantage of unrelated diversification is that it may lead to politics between divisions. There may for example be conflicts over resource allocations – with different divisions fighting over the limited financial and other resources that the company has.
which of the following are negatives or disadvantages of pursuing unrelated diversification strategies? no potential for competitive advantage beyond any benefits of corporate parenting and what each individual business can generate on its own.
Which statement is true concerning the pursuit of growth through unrelated diversification? It can be misguided if the growth is not profitable growth.
There are four most often cited reasons for diversification: the internal capital market, agency problems, increased interest tax shield and growth opportunities.
How do firms create value when using related diversification strategy?
The firms can create value by using related diversification strategy through operational relatedness and corporate relatedness. Under operational relatedness the firm share its activities; whereas, under corporate relatedness the firm relocate its core competencies.
The H-Form Organization.
The H-form design is used to implement a strategy of unrelated diversification.
Conglomerate diversification
Conglomerate diversification involves adding new products or services that are significantly unrelated and with no technological or commercial similarities. For example, if a computer company decides to produce notebooks, the company is pursuing a conglomerate diversification strategy.
1) You get more product variety
With more product variety, you capture more customer attention and your brand receives a tremendous boost as well as the profitability of the company rises. Thus having more products is good for your business.
Answer: Concentric Diversification: It is similar to related diversification, wherein the new business entered into by the firm is associated with the existing business by way of process, technology or market. The newly entered product is a spin-off from the already existing facilities.
Which of the following is an important appeal of a related diversification strategy? Offers opportunities to transfer skills, expertise, technical know-how, or other capabilities from one business to another.
The correct answer is D) Backward integration. Reason: When a small number of suppliers and a high number of competitors or business firms are present in the market, then a backward integration strategy will be useful.
Answer and Explanation: This strategy is not a good reason for a merger since it doesn't necessarily lead to the creation of value. Diversification is said to reduce unsystematic risk. Unsystematic risks refer to those risks that are unique and only apply to a particular company or industry.
Understanding related diversification
While unrelated diversification involves going into markets that are not connected to the firm's prior activities, related diversification specifically tries to move to areas that the firm already has some strengths.
An advantage of unrelated diversification is that competencies can be shared and leveraged throughout the value chain activities.
What is unrelated diversification strategy with example?
Unrelated Diversification —Diversifying into new industries, such as Amazon entering the grocery store business with its purchase of Whole Foods. Geographic Diversification —Operating in various geographic markets, which is the corporate strategy of Starbucks, Target, and KFC.
A company is diversified when it is in two or more lines of business. Companies pursue unrelated diversification strategy when they enter into a new activity that has no obvious similarities with any of the company's existing activities.
EXPLANATION: Related diversification occurs when a firm operates multiple businesses within the same industry.
An advantage of horizontal integration is that it can lower a company's cost structure by creating increasing economies of scale.
- Apple | From Computers to MP3 Players and Phones. ...
- Disney | From Cartoons to Cruises, Theme Parks, and Media. ...
- Volkswagen | Selling Cars to Everyone. ...
- Estée Lauder | Cosmetics, Personal Care, and Perfumes. ...
- Pepsi and Coca-Cola | Beverages to Snacks and Energy Drinks.
An advantage of unrelated diversification is that competencies can be shared and leveraged throughout the value chain activities. 15. An appropriate reason to diversify is to pool the risk from several business ventures in order to create a more stable income stream.
Which of the following is the best example of unrelated diversification? A producer of mens apparel acquiring a maker of golf equipment.
Unrelated diversification: When a firm enters an industry that lacks any important similarities with the firm's existing industry or industries.
The two biggest drawbacks or disadvantages of unrelated diversification are: Demanding managerial requirements and limited competitive advantage potential.
Related Diversification. -entry into a new business activity that is related to a company's existing business activity OR has commonalities between one of more components of each activity's value chain. -based on transferring and leveraging competencies, sharing resources, bundling products. Unrelated Diversification.
What are the two important pitfalls of an unrelated diversification strategy?
The two biggest drawbacks or disadvantages of unrelated diversification are: A. the difficulties of passing the cost-of-entry test and the ease with which top managers can make the mistake of diversifying into businesses where competition is too intense.
Which of the following is the best example of related diversification? stem from cost-saving strategic fits along the value chains of related businesses.
Which of the following is the best example of unrelated diversification? A producer of mens apparel acquiring a maker of golf equipment.
Unrelated diversification: When a firm enters an industry that lacks any important similarities with the firm's existing industry or industries.
Another disadvantage of unrelated diversification is that it may lead to politics between divisions. There may for example be conflicts over resource allocations – with different divisions fighting over the limited financial and other resources that the company has.
Which statement is true concerning the pursuit of growth through unrelated diversification? It can be misguided if the growth is not profitable growth.
Economic diversification is the process of shifting an economy away from a single income source toward multiple sources from a growing range of sectors and markets.
In terms of strategy making, what is the difference between a one-business company and a diversified company? A. The first uses a business-level strategy, while the second uses a set of business strategies and a corporate strategy.
An advantage of unrelated diversification is that competencies can be shared and leveraged throughout the value chain activities. 15. An appropriate reason to diversify is to pool the risk from several business ventures in order to create a more stable income stream.
“One of the main reasons that diversification fails is because businesses do not have the right strategy in place,” Shipilov said. “They must think carefully about what distinct resources or capabilities they can move between different markets to give them a competitive advantage.
Which of the following are negatives or disadvantages of pursuing unrelated diversification strategy?
which of the following are negatives or disadvantages of pursuing unrelated diversification strategies? no potential for competitive advantage beyond any benefits of corporate parenting and what each individual business can generate on its own.
How does a conglomerate benefit from following an unrelated diversification strategy? The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.
The firms can create value by using related diversification strategy through operational relatedness and corporate relatedness. Under operational relatedness the firm share its activities; whereas, under corporate relatedness the firm relocate its core competencies.
Answer: Concentric Diversification: It is similar to related diversification, wherein the new business entered into by the firm is associated with the existing business by way of process, technology or market. The newly entered product is a spin-off from the already existing facilities.
