The two biggest drawbacks or disadvantages of unrelated diversification are
A)underemphasizing the importance of resource fit and the strong likelihood of diversifying into businesses that top management does not know all that much about.
B)insufficient cash flows to finance so many different lines of business and a lack of uniformity among the strategies of the businesses it has diversified into.
C)volatile sales and profits and making the mistake of diversifying into too many cash cow businesses.
D)the difficulties of competently managing many different businesses and being without the added source of competitive advantage that cross-business strategic fit provides.
E)over-investing in the achievement of economies of scope and the difficulties of achieving a good mix of cash cow and cash hog businesses.

Question

Quizplus · Accepted Answer

The two biggest drawbacks of unrelated diversification are the difficulties of competently managing many different businesses and the lack of cross-business strategic fit. Unrelated diversification often results in a lack of understanding and expertise in the diverse businesses in which an organization operates. Additionally, without the added competitive advantage of cross-business strategic fit, each business is left to create its own strategy, which can lead to inconsistent and unsuccessful strategies.

The Two Biggest Drawbacks or Disadvantages of Unrelated Diversification Are