The risk for firms that follow the unrelated diversification strategy in developed economies is that:
A) external investors tend to dump the stocks of conglomerates during economic downturns.
B) conglomerates are typically owned by one powerful entrepreneur and do not survive his/her retirement or death.
C) government regulations, especially in Europe, have periodically forced the dissolution of conglomerates.
D) competitors can imitate financial economies more easily than they imitate economies of scope.

Question

Quizplus · Accepted Answer

Unrelated diversification relies on financial economies, which are easier for competitors to replicate compared to the unique synergies and efficiencies found in economies of scope.

The Risk for Firms That Follow the Unrelated Diversification Strategy