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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Definitions:

Compression

is the application of force that presses matter together, reducing its volume or causing deformation.

Tension

A force that pulls materials apart, causing stress or strain in geological contexts, such as the stretching of the Earth's crust.

Shear

A strain in materials characterized by slippage along parallel planes, often related to faults and shear zones in geology.

Differential Stress

Stress applied to a rock body in different directions, leading to deformation like folding, faulting, or flowing.