Diversifying into a New Industry by Forming a New Internal

question 50

Multiple Choice

Diversifying into a new industry by forming a new internal subsidiary to enter and compete in the target industry is attractive when

• A)all of the potential acquisition candidates are losing money.
• B)it is impractical to outsource most of the value chain activities that have to be performed in the target business/industry.
• C)there is ample time to launch the new business from the ground up.
• D)the company has built up a hoard of cash with which to finance a diversification effort.
• E)none of the companies already in the industry is an attractive strategic alliance partner.

---

Definitions:

Brand Loyalty

A customer's consistent preference for one brand over all others, often reflected in repeated purchases.

Economies of Scale

The financial benefits that businesses gain from their operation size, where the cost for each unit produced typically diminishes as the scale of operation grows.

Advertising Expenditures

The amount of money spent on promoting products or services through various media, aiming to increase awareness and sales.

GDP

Gross Domestic Product, the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.