Checking for resources fits in diversified set of businesse

Question

Explain the way to check for resources fits in the diversified set of businesses.

Answer 1

Checking for Resource Fit

1. The businesses in a diversified company’s line-up require to showing good resource fit also a good strategic fit.

2. Screening the diversified set of businesses as a group of cash flows and cash requirements is a main step forward in understanding what the financial consequences of diversification are and why having businesses with fine financial resource fit is so useful.

3. Star businesses have powerful or market-leading competitive situations in attractive, high stages of profitability and high-growth markets and are frequently the cash cows of the future.

4. Aside from cash flow considerations, a business has fine financial fit when it contributes to the achievement of business performance objectives and when it materially improves shareholder value via helping drive enhances in the company’s stock price.

5. A diversified organization’s strategy fails the resource fit test when its financial resources are prolonged across so numerous businesses that its credit rating is impaired.

KEY CONCEPT:

A close match between industry main success factors and company capabilities and resources is a firm symbol of fine resource fit.

6. A Note of Carefulness: Hitting a home run in one business does not mean an organization can easily go in a new business with same resource requirements and hit a second home run.