Ch11

Question 1

Porter’s tests for a successful acquisition? (2)

Answer 1

1) The better off test - Would shareholders simply be better off buying shares in target company?
2) The cost of entry test - Are there cheaper ways of entering the market?

Question 2

Key issues with any joint development strategy? (3)

Answer 2

1) Sharing risks and returns
2) Possible conflicts
3) Confidentiality

Question 3

Advantages of acquisition? (4)

Answer 3

1) Quicker
2) Get round barriers to entry
3) One less competitor
4) Synergies

Question 4

Disadvantages of acquisition? (4)

Answer 4

1) Entry cost may be too high
2) Clash of cultures
3) Easier to control growth if organic
4) Reputation of the target company