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

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Which strategy might involve declaring insolvency?

Turnaround Strategy

Bankruptcy

Declaring insolvency is a process that often pertains to bankruptcy, where a company acknowledges that it cannot meet its financial obligations. Bankruptcy is a legal status that can provide a firm with protection from creditors while it restructures its debts or liquidates its assets to pay off obligations. This process is designed to help an organization either regain stability through a restructured repayment plan or to reorganize and optimize its remaining resources if liquidation is necessary.

In contrast, a turnaround strategy involves initiatives aimed at reviving a business that is facing distress, typically without resorting to bankruptcy. Horizontal integration refers to a strategy of acquiring or merging with competitors to increase market share, while concentric diversification involves expanding into new markets or product lines that are related to the existing business. These strategies do not intrinsically include the concept of declaring insolvency, making bankruptcy the only option that directly relates to this scenario.

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Horizontal Integration

Concentric Diversification

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