AEM 2601 || with 100% Error-free Answers.

motive for diversification correct answers value creation value creation correct answers for diversification to create shareholder value, putting different businesses under common ownership must increase their total profitability Porter's Three Essential Tests correct answers The Attractiveness Test, The Cost of Entry Test, The Better-Off Test The Attractiveness Test correct answers must be directed towards attractive industries The Cost of Entry Test correct answers must not capitalize all future profits The Better-Off Test correct answers either the new unit must gain competitive advantage from its link with the company or vice-versa economies of scope correct answers cost savings from sharing of resources and capabilities economies of scope: sources correct answers sharing tangible resources, intangible resources, market power, functional capabilities need-to-own test correct answers does the firm need to own in order to benefit/profit from them need-to-own test: same value creation can be achieved through correct answers licenses, strategic alliances, long term contracts relatedness of diversification correct answers resource allocation, strategy formulation, performance management resource allocation correct answers similar sources of risk, time spans of investment projects strategy formulation correct answers similar key success factors, similar stages of the industry life cycle performance management correct answers similar time horizons for performance targets sources of transaction costs correct answers small number of buyers and sellers, frequent transactions, high asset specificity, uncertainty asset specificity correct answers extent to which assets in that exchange have a higher value in that particular relationship than next best option 3 types of specificity correct answers site specificity, technical specificity, human capital specificity