2015-10-14
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A) industries
B) Diversification
C) competes
D) electricity monopolies
E) industries and markets
F) growth prospects
G) economies of scope
H) a sole provider
I) fully competitive
J) electric utility firms
K) outside their fields of expertise
L) based
M) performance outcomes
N) telecommunications
O) stem from
P) related businesses
Q) shareholders
R) has moved into
S) into new lines of business
T) core business
1. _____________ is a prominent strategy for pursuing organizational growth, yet performance outcomes
have been notoriously disappointing, especially for unrelated diversification via acquisition. While firms in
most 2. __________ have thus constrained their diversification strategies, 3. ____________ are increasingly
pursuing diversification by purchasing businesses 4. ______________ to cope with bleak 5.
_____________ and deregulation uncertainties. Considering that a utility company is generally 6.
_______________ of essential service within a geographic territory, many stakeholders are justifiably
concerned about increasing levels of electric utility diversification and potential 7.________________.
Diversification strategy involves both the scope of the organization defined by industries and markets in
which it 8.____________, as well as the vehicles--acquisition, start-up, or joint venture/strategic alliance--
used to enter these 9.________________.
An organization is said to have limited diversification if most or all of its revenues 10._______________ a
single business.
Diversification is a widely prominent strategy for pursuing organizational growth. For decades managers
have been enamored with prospects for market power, 11._____________, risk diversification, and mere
size and visibility resulting from diversification initiatives.
Synthesizing insights across the complementary theories and evidence from the various empirical studies, it
appears that electric utilities would have a higher likelihood of creating value by diversifying into 12.
_______________ where resources and skills from their 13. could be fruitfully deployed. However, electric
utilities have mainly favored acquisition into growth industries including health care and various types of
manufacturing, as well as 14. _________________ and home security. Recent divestitures of non-core
businesses and more constrained diversification suggest that the limits of effective diversification have been
exceeded in some electric utility firms.
While firms in other industries have already tried and abandoned high levels of diversification, electric utilities
are still striving to diversify 15. _____________ through (frequently unrelated) acquisitions.
Examples of diversification abound. The Dutch electricity company PNEM/MEGA 16. ______________
water and waste services. Reliant Energy (17. _____________ in the United States) has acquired gas and
electricity utilities in Europe. And the former 18. ____________ of Ireland, Italy, Scotland, and Spain all have
telecom and Internet businesses.
Such diversification can create enormous value. Yet 19. ______________ should bear in mind that utility
markets around the world are at various stages of a transition: they are in the process of being liberalized but
have not yet become 20._______________. During this transition, there are, unquestionably, opportunities
for a diversified utility to make money. But once full competition is established, diversified companies are
unlikely to perform as well as focused ones, and utilities will find themselves paring down their noncore asset
base as quickly as they are now enlarging it.
