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A multidivisional corporation that manufactures large steel tanks is considering starting a new business unit to serve the transportation industry. The company is utilizing the I/O model to develop its strategy. Which of the following decisions is consistent with this model?

1) Investing in research and development to create innovative transportation solutions
2) Expanding the production capacity of the existing steel tank manufacturing division
3) Acquiring a transportation company to enter the market quickly
4) Implementing cost-cutting measures to improve profitability

1 Answer

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Final answer:

Acquiring a transportation company to quickly enter the market is consistent with the I/O model for strategy development, as it focuses on external industry dynamics such as competition and market conditions, aligning with vertical integration strategies.

Step-by-step explanation:

When a multidivisional corporation that manufactures large steel tanks considers starting a new business unit to serve the transportation industry and uses the I/O model for developing its strategy, the company typically looks at the external environment such as market demand, competition, and industry structure.

Given this context, the decision that is consistent with the I/O model would likely be acquiring a transportation company to enter the market quickly. This move aligns with vertical integration, similar to Rockefeller's strategy, and addresses the aspects of market conditions and competition, as well as allows rapid market entry, which is crucial in the transportation industry where independent truckers signify a perfectly competitive market.

Moreover, the decision to acquire rather than expand existing production or invest in R&D focuses on market dynamics and existing competition, core principles of the I/O model. Lastly, operation efficiencies and cost-cutting measures, while important, are more related to internal processes, and thus less about industry structure and more about the firm's internal strategies.

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