The managers at Camphor Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector?
A) by having higher performance in another sector
B) by sharing their market power
C) by increasing the firm's risk in another sector
D) by motivating managers

Question

Quizplus · Accepted Answer

Firms often attempt to reduce risk by diversifying their product and service portfolio through competing in a number of different industries. The rationale behind these diversification moves is that falling sales and lower performance in one sector might be compensated by higher performance in another.

The Managers at Camphor Plastics Decided That Their Firm Needed