Question

A company's new business is said to possess "synergy" with the company's existing business when ____

(A) the diversification move is able to pass the industry attractiveness test and the cost-of-entry test.
(B) the diversification effort results in 1 + 1 = 3 benefits that enable the new business and the existing business to perform better as part of the same diversified firm than they would each perform operating as an independent, stand-alone business.
(C) the diversification move is able to pass the growth test, the profit test, and the 1 + 1 = 2 test. prevailing industry and competitive conditions in the company's existing businesses and the new business are all conducive to earning an attractive profit and return on investment.
(D) the diversification move is able to pass the resource strength test, the cash flow test, and the diversity test.

Answer 1

Answer: the correct answer is (B) the diversification effort results in 1 + 1 = 3 benefits that enable the new business and the existing business to perform better as part of the same diversified firm than they would each perform operating as an independent, stand-alone business.

Explanation: the result of synergy has to be a win win situation in which new business and existing business work as a perfect machine to obtain the best output possible for all members of the organization.