A company should pursue unrelated diversification instead of related diversification when:
A) its core skills are highly specialized and have few applications outside its core business.
B) the company's top managers are skilled at acquiring and turning around poorly run enterprises.
C) its core technological skills are applicable to a wide variety of industrial and commercial situations.
D) it wants to maximize growth.
E) the bureaucratic costs of implementation do not exceed the value that can be created by realizing economies of scope.

Question

Quizplus · Accepted Answer

If a company's core skills are highly specialized and have few applications outside its core business, pursuing unrelated diversification would be more feasible and effective than related diversification. This is because related diversification involves leveraging the company's existing skills and resources to expand into related industries, which would not be possible if the company's skills are highly specialized and have limited applications. Pursuing unrelated diversification would allow the company to leverage its financial resources and managerial skills to explore new business opportunities that are not related to its core business.

A Company Should Pursue Unrelated Diversification Instead of Related Diversification