Chapter Ten - Chapter Ten Evaluating the Strategies of...

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Chapter Ten Evaluating the Strategies of Diversified Companies Steps in Analyzing a Diversified Company’s Strategy 1. The procedural steps in evaluating and critiquing a diversified company’ strategy include: Applying the industry attractiveness test; Determining the competitive strength of each business in the portfolio to see which ones are strong contenders in their respective industries; Crafting new strategic moves to improve the performance of the total business portfolio via acquisitions, divestiture, or shift in internal priorities and resource allocation. Evaluating the strategic and resource fits among sister businesses in the company’s portfolio. 2. A comprehensive critique of the group of businesses a company has diversified into involves Evaluating the attractiveness of each industry in which the firm does business; Evaluating each business’s competitive strength and competitive position to determine which ones are strong contenders in their respective industries and which are not. Ranking the different businesses in terms of their priority for resource allocation and new capital investment. Ranking the business units from highest to lowest on the basis of historical performance and future prospects. 3. Which of the following is not a standard part of analyzing the strategy of a diversified company? a. Assessing the competitive strength of each business the company has diversified into. b. Determining which business units have the most potential for employing low-cost producer, differentiation or focus strategies. c. What priority to give each of the company’s business units in allocating recourse and making new capital investments. d. Identifying the company’s current corporate strategy. Evaluating Industry Attractiveness 4. Three tests: The attractiveness of each industry represented in the company’s collection of business units: mkt size & growth potential, competition, O&T, resource need, strategic & resource fits, profitability, environmental factors, risk; Each industry’s attractiveness relative to the others: quantitative measure, rank and emphasis; The attractiveness of all the industries as a group: composition of portfolio; 5. The chief purpose of measuring each industry’s attractiveness relative to the others is
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