3. The rationale for diversification (Connect, Perform) Use your knowledge of diversification to fill in the blank in the following sentence. Emperador Distillers Inc., the largest liquor company in the Philippines and itself a subsidiary of Alliance Global Group Inc., acquired Bodega San Bruno S.A., a brandy company located in Spain. The move had the potential to create if the combined organization could save money by combining duplicate activities, such as human resource management and accounting, and both companies could make better use of their bottling facilities. Select the correct labels for the A and B positions in the following diagram. Performance Versus Corporate Strategy Performance Focused Strategy A B Extent of Diversification Less More A. B. Companies that are successful in diversification consider their diversification options carefully, often subjecting them to a three-pronged diversificati test. Match each question in the following table to a specific area of the diversification test. Test Area Manager's Question How much power will our suppliers have over the price of the goods they sell to us? Does owning this business give us a bigger competitive advantage than an alternative arrangement, such as a strategic alliance with the business? How much will we pay to enter this business versus the value we get from being in the industry? How does a manager know whether the company meets the better-off test after diversification? Check all that apply. By analyzing distribution of capital across business units By measuring economies of scope By determining whether the company is selling its products or licensing them to other businesses By analyzing the company's sales in new markets