Frank stronach founder of magna international inc has

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Frank Stronach, founder of Magna International Inc., has a preference for growth, a willingness to take risks, and  confidence in his business skills. As a result, he undertook many growth ventures into unrelated markets, and Magna’s  shares dropped significantly in value. Once the company recovered by focusing on its core auto parts business, Frank  once again plans to take the company into non-automotive ventures despite another drop in share price. This is a good  demonstration of the negative role his management preferences play on strategy  selection. PART B 1. According to the article, "From competitive advantage to corporate strategy", the author describes 3 tests that a firm should use when assessing where to diversify. Please define and describe the 3 tests. Please apply these tests to a case that has been discussed in a case or article covered in class. The Attractiveness Test The industries chosen for diversification must be structurally attractive or capable of being made attractive This can be determined by using Porter’s 5 Forces Model
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The Cost-of-Entry Test The cost of entry must not capitalize all the future profits A company can enter new industries through acquisition or startup Catch-22 scenario – attractive industries are attractive because their entry barriers are high The Better-Off Test Either the new unit must gain competitive advantage from its link with the corporation or vice versa. General Electric acquires new firms in new industries every year. Some of these acquisitions are profitable while others aren’t. Many of General Electric’s acquisitions took place in the attractive plastics industry and since GE used acquisitions, it overcame the barriers to entry since the acquired firms were already in the industry. Finally, GE was able to further its portfolio and was better off in some cases while the plastics industry was attractive. 2. Define and describe the corporate strategy of a case or firm discussed in class or in articles. Please describe in details to what extent their current or proposed corporate strategy may or may not build on a competitive advantage or create one. GE corporate strategy is the combination of portfolio management, restructuring and activities sharing. It uses Portfolio management strategy since it is acquiring and managing different businesses: GE Infrastructure, Industrial, Commercial Finance, Healthcare, Money and NBC Universal. They are diverse in nature and each of them is one of the largest and most profitable companies in their sectors. GE has made different acquisitions over years. Some of them are the acquisition of small and undervalued businesses which GE then infuse them with new technology and made are follow-up acquisition to strengthen the sector the company is in. For instance, GE creates a new high-tech industrial business called Enterprise Solution. They then make several investments in financial services businesses, infuse
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