Question

Ranking a diversified company’s businesses in terms of priority for resource allocation and new capital investment

Multiple Choice

• should be done chiefly on the basis of appealing industry attractiveness and resource fit and secondarily on the basis of competitive strength and strategic fit with other businesses.

• entails arraying the various businesses from the biggest cash hog down to the biggest cash cow; big cash hogs get the highest priority for resource allocation and big cash cows get the lowest priority.

• should be done principally on the basis of which businesses offer the best prospects (given their industry attractiveness and competitive strength) and have solid and appealing strategic fits and resource fits.

• should be based chiefly on relative market share, recent profitability, and potential for achieving cash cow status.

• should be based primarily on cross-business resource fit considerations, each business unit’s relative market share, and each business’s projected ability to cover its debt payments and generate positive cash flows.

Answer 1