Which of the following statements is an advantage of related diversification strategy?
A) Related diversification strategy allows a firm to maintain several businesses that are not connected in any way.
B) The sharing of resources is a key component of developing economies of scope and often increases a firm's competitive advantage.
C) Related diversification strategies often achieve financial economies through the restructuring of business units.
D) Related diversification strategy can allow a sick or dying company to use capital generated in a profitable division to prop it up for a short period of time.

Question

Quizplus · Accepted Answer

The sharing of resources is a key advantage of related diversification strategy as it helps the firm to achieve economies of scope, increase efficiency, and gain a competitive advantage. Option A is incorrect as related diversification implies that businesses are connected in some way. Option C may be true, but it is not the primary advantage of related diversification. Option D is also incorrect as it is not a sustainable strategy to prop up a dying company.

Which of the Following Statements Is an Advantage of Related