04.1: Diversification Flashcards

Question 1

Q

Strategic diversification:
Types
Frequent outcome

Answer

A

related or unrelated

often fails

Question 2

Q

Related diversification:

4 ways to create value

Answer

A

Horizontal strategies:
-leveraging core competencies > more VA to clients
-sharing resources > share activities > lower costs, higher revenues
-pooling negotiating power w peers
Vertical strategies:
-pooling negotiating power w strong parent
-vertical integration > more control but costs

Question 3

Q

Unrelated diversification:

taxonomy

Answer

A

restructuring:
- assets: sell unproductive assets, buy new ones
- capital: debt-equity mix
- mgmt: chg team
corporate parenting
portfolio analysis

Question 4

Q

Means of diversification

Answer

A

Strategic alliances
Joint ventures
M&amp;A
-Divestments
Internal development

Question 5

Q

Strategic alliances:
Types
Pros
Cons

Answer

A

M&A, joint ventures; flip side=divestment
synergies: leverage competencies, sharing activities, build market power; enter new markets
can be expensive, copied, ego-driven