Acquisition of an Existing Business Is an Attractive Strategy Option

question 33

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 new start-up 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 start-up operation,thus passing the cost-of-entry test.
• C)is a less risky way of passing the attractiveness test.
• 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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