With a strategy of unrelated diversification, an acquisition is deemed to have potential if it
A)can achieve at least existing profit margins into the near future.
B)has the opportunity to generate positive buzz in the industry, even if it may not be able to contribute to the parent firm's bottom line.
C)can pass the industry attractiveness test and the cost of entry test, and if it has good prospects for profit growth.
D)can pass at least the industry attractiveness test if not the cost of entry test.
E)can add economic value for managers.

Question

Quizplus · Accepted Answer

A strategy of unrelated diversification involves entering into industries that are not related to a firm's current business. In such a strategy, it is important to select potential acquisitions that pass the industry attractiveness test and cost of entry test, and have good prospects for profit growth in order to add economic value to the parent company. Achieving existing profit margins is not enough to justify an acquisition under this strategy, and generating positive buzz in the industry may not contribute to the bottom line. Therefore, choice C is the best option as it highlights the key criteria for selecting potential acquisitions in an unrelated diversification strategy.

With a Strategy of Unrelated Diversification, an Acquisition Is Deemed