A company should pursue related diversification instead of unrelated diversification when

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Pursuing related diversification allows a company to leverage its core skills and transfer competencies between businesses, creating value through resource sharing. This strategy is suitable for companies whose skills are applicable in multiple industries and can be used to enhance the performance of new and existing businesses. Pursuing unrelated diversification, on the other hand, involves entering new businesses that are unrelated to the company's core skills and competencies, which can be riskier and less profitable. Therefore, related diversification is the best choice when a company's core skills create value through resource sharing and transferring competencies between businesses.

A Company Should Pursue Related Diversification Instead of Unrelated Diversification