The Attractiveness Test for Evaluating Whether Diversification into a Particular

question 59

Multiple Choice

The attractiveness test for evaluating whether diversification into a particular industry is likely to build shareholder value involves determining whether

• A)conditions in the target industry allow for profits and return on investment that is equal to or better than that of the company's present business(es).
• B)the potential diversification move will boost the company's competitive advantage in its existing business.
• C)shareholders will view the contemplated diversification move as attractive.
• D)key success factors in the target industry are attractive.
• E)there are attractive strategic fits between the value chains of the company's present businesses and the value chain of the new business it is considering entering.

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Definitions:

Theory Y

A management theory holding that employees are self-motivated, seek responsibility, and can solve work problems creatively.

Expectancy Theory

A motivational theory suggesting that individuals are motivated to act in certain ways based on the expectation that their actions will lead to desired outcomes.