Question

Which one of the following is not part of the task of checking a diversified company's business?

A. Determining which business units have value chain match-ups that offer opportunities to transfer competitively valuable resources/capabilities from one business to another and which business lack such opportunities (and therefore have inadequate resource fit).
B. Determining whether one or more businesses soak up a disproportionate share of the corporate parent's financial resources, make subpar or inconsistent bottom-line contributions, are too small to make a material earnings contribution, or are unduly risky (such that the financial well-being of the whole company could be jeopardized in the event such businesses fall upon hard times).
C. Determining whether the corporate parent's resources and parenting capabilities are poorly matched to the needs/requirements of one or more of the businesses it has diversified into.
D. Determining whether the company has adequate financial strength to fund its different businesses, pursue growth via new acquisitions, and maintain a healthy credit rating.
E. Determining whether the company's resources and capabilities are being stretched too thinly by the resource/capability requirements of one or more of its businesses.

Answer 1

All the above options are correct.

Step-by-step explanation:

Value chain match-ups give rise to competitive advantage if it allows sister companies to leverage economies of scale by sharing production resources to the end that costs are significantly reduced, skills and technology are transferred and information grows within the system.

If any sub-business within a diversified group is taking more resources than it is contributing, it should be evaluated for possible course correction, "tune-ups" and or turn around interventions.

When there is a poor match between the parent company and the newly acquired company, there is often the need to re-evaluate the decision. If it is possible to effect a turnaround, at the least cost possible, the parent company would most likely do that otherwise, it "disconnects the umbilical cord".

Finance is a critical factor with maintaining a diverse array of businesses. Ideally, each business should be responsible for it's financial health. However the collective financial health of each sub-business is also reflective of the ability to monitor the progress of each subsidiary an make good business calls.

Cheers!