When diversification combines two businesses in different industrial sectors,the most important determinant of whether the diversification is likely to create value is whether the diversification:
A)Changes the debt/equity ratio of the combined company
B)Is between businesses with similar values and management systems
C)Causes management to lose its focus on its core business
D)Offers opportunities for sharing resources and capabilities.

Question

Quizplus · Accepted Answer

The most important determinant of whether diversification is likely to create value when combining businesses in different industrial sectors is whether it offers opportunities for sharing resources and capabilities. This is because combining businesses with complementary resources and capabilities can lead to synergies, cost savings, and increased competitive advantage. Choices A, B, and C are not necessarily determinants of whether diversification will create value.

When Diversification Combines Two Businesses in Different Industrial Sectors,the Most