Diversification Based on Transferring Competencies

question 37

Multiple Choice

Diversification based on transferring competencies

• A) requires the existence of significant commonalities between one or more of the value-creation functions.
• B) requires that acquisitions be made in the same industry as the company's core business area.
• C) allows a company to achieve the advantage of risk pooling.
• D) allows a company to reduce bureaucratic costs.
• E) requires both the existence of significant commonalities between one or more of the value-creation functions and that acquisitions be made in the same industry as the company's core business area.

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Definitions:

Merchandising Company

A Merchandising Company is a business that purchases finished products and sells them at a profit, without altering the products themselves.

Cost Structure

The composition of a company’s costs, including fixed and variable costs, which impacts its profitability and pricing strategy.

Variable

A variable is an element, feature, or factor that is liable to vary or change; in business, it often refers to costs that fluctuate with the level of production or sales.

Fixed

Pertains to costs that remain constant regardless of the level of production or sales, such as rent, salaries, and insurance.