University of Central Florida (UCF) MAN6721 Applied Strategy and Business Policy Practice Exam 1

The purpose of a Poison Pill strategy in corporate governance primarily revolves around deterrence against potential hostile takeovers. This strategy is designed to make a company's stock less attractive or more costly for a potential acquirer. By implementing various mechanisms, such as allowing existing shareholders to purchase additional shares at a discount, the strategy effectively dilutes the ownership interest of the acquirer and raises the costs associated with the takeover attempt.

This defensive tactic aims to protect the company from unwanted takeovers, thereby preserving the existing management's control and strategic direction. It serves as a warning to hostile bidders that acquiring the company may not be as easy or lucrative as it may appear. Consequently, the Poison Pill strategy can maintain stability within the company by ensuring that any acquisition efforts are met with challenges that could dissuade potential buyers.

The other options, while related to corporate strategy or governance, do not capture the specific intent of a Poison Pill strategy, which focuses on discouraging unsolicited takeover attempts rather than enhancing shareholder value directly during mergers, improving management structures, or investing in new technologies.