Beagle Autos is known for its affordable and reliable brand of consumer vehicles. Because its shareholders expect to see an improved rate of growth in the coming years, Beagle's executives have decided to diversify the company's range of products so that at least 40 percent of the firm's revenue is generated by new business units. However, the company's resources, capabilities, and competencies are limited to producing other forms of motorized vehicles, such as motorcycles and all-terrain vehicles (ATVs). Which type of corporate diversification strategy should Beagle pursue?
A) dominant business
B) related-constrained
C) related-linked
D) unrelated

Question

Quizplus · Accepted Answer

Beagle Autos should pursue a related-constrained diversification strategy. A firm follows a related-constrained diversification strategy when it derives less than 70 percent of its revenues from a single business activity and obtains revenues from other lines of business related to the primary business activity. Executives engage in a new business opportunity only when they can leverage their existing competencies and resources. Specifically, the choices of alternative business activities are limited-constrained-by the fact that they need to be related through common resources, capabilities, and competencies.

Beagle Autos Is Known for Its Affordable and Reliable Brand