Apple Inc.'s decision to acquire Beats Electronics and Beats Music in 2014 for $3 billion rather than enter into a joint venture with that company was an attractive strategy option for entering a promising new industry in headphones and streaming music services because it __________.

Question

A) was an effective way to hurdle entry barriers, was quicker than trying to launch a brand-new start-up or joint venture operation, and allowed Apple Inc. to move directly to the task of building a strong position in the target industry.
B) offered Apple Inc. the prospect of gaining an immediate competitive advantage in the new industry and thus helps ensure that the diversification move could pass the competitive advantage test for building shareholder value.
C) was less expensive for Apple Inc. than launching a new start-up operation, thus passing the cost-of-entry test.
D) was more likely to result in Apple Inc.'s passing the shareholder value test, the profitability test, and the better-off test.
E) would have entailed divulging sources of competitive advantage such as trade secrets, confidential financial information, and proprietary processes that Apple is unwilling or unable to share.

Answer 1

A) was an effective way to hurdle entry barriers, was quicker than trying to launch a brand-new start-up or joint venture operation, and allowed Apple Inc. to move directly to the task of building a strong position in the target industry.
In this case, Apple Inc.'s acquisition of Beats Electronics and Beats Music, both existing businesses, offered an effective way to hurdle such entry barriers as acquiring technological know-how, establishing supplier relationships, achieving scale economies, building brand awareness, and securing adequate distribution. The electronics and entertainment industry segments to be entered through diversification must be structurally attractive, have resource requirements that match those of the parent company, and offer good prospects for growth, profitability, and return on investment.