Chapter 8 Corporate Strategy: Diversification and the Multibusiness Company

These flashcards cover key terms and concepts related to corporate strategy and diversification.

Business Diversification

The process of entering into new industries or markets to enhance shareholder value.

Cross-Business Strategic Fit

The alignment and integration of different business units that leverage strengths for competitive advantage.

Related Diversification

A strategy that involves expanding into businesses that are related to existing operations.

Unrelated Diversification

A strategy that involves entering into businesses that are completely different from the existing operation.

Synergy

The combined effect that is greater than the sum of individual effects; often achieved through diversification.

Joint Venture

A strategic partnership between two or more firms to pursue shared objectives.

Acquisition

The process of acquiring another company to enhance market position or capabilities.

Internal Development

The method of creating a new business within the existing company rather than through mergers or acquisitions.

Economies of Scope

Cost advantages that result from spreading resources across multiple products or business units.

Market Entry Barriers

Challenges that make it difficult for new competitors to enter an industry.

Industry Attractiveness Test

Analyzing whether the industry offers comparable or better profitability and returns than current business units.

Cost of Entry Test

Evaluating whether the costs to enter a new market or industry are too high to justify potential profits.

Better-Off Test

Assessing if diversification will bring additional benefits or synergy to the company.