Acquisition of an Existing Business Is an Attractive Strategy Option

question 45

Multiple Choice

Acquisition of an existing business is an attractive strategy option for entering a promising new industry because it:

• A) is an effective way to hurdle entry barriers,is usually quicker than trying to launch a brand-new startup operation,and allows the acquirer to move directly to the task of building a strong position in the target industry.
• B) is less expensive than launching a new startup operation,thus passing the cost-of-entry test.
• C) offers a challenging opportunity to train new resources and revive a sagging business even if does not offer great prospects for growth,profitability,or return on investment.
• D) is more likely to result in passing the shareholder value test,the profitability test,and the better-off test.
• E) offers the prospect of gaining an immediate competitive advantage in the new industry and thus helps ensure that the diversification move will pass the competitive advantage test for building shareholder value.

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