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Hi sir, can u pls explain the 3 test above and how to apply it in the case study?
Porter prefers three critical tests for success:
1. The attractiveness test: High ROI , high entry barriers, low customers and suppliers bargaining power, and few substitute products.
2. The cost-of-entry test. If the cost of entry is so high that it prejudices the potential return on investment, profitability is eroded before the game has started. [This is what you refer to as the capital test]
3. The better-off test. How will the acquisition provide advantage to either the acquirer or the acquired?
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