A strategy based on diversification may fail to add value because companies:
A) seek to achieve differentiation instead of low cost.
B) diversify into areas in which they have some knowledge and miss out on profitable opportunities in other areas.
C) make acquisitions rather than develop new technologies on their own.
D) incur bureaucratic costs that exceed the value created by the strategy.
E) seek to achieve a low-cost position instead of differentiation.

Question

Quizplus · Accepted Answer

The main reason why a diversification strategy may fail to add value is due to the bureaucratic costs incurred by the company, which end up exceeding the value created by the strategy. These costs can arise from the need to integrate different businesses, cultures, and systems, which can lead to delays, conflicts, and inefficiencies. The other options are not necessarily reasons why a diversification strategy would fail, although they may impact its success to some extent.

A Strategy Based on Diversification May Fail to Add Value