Two important negatives 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 a set of fundamentally different businesses and having a very limited competitive advantage potential that cross-business strategic fit provides.
E) overinvesting 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

Unrelated diversification involves entering into businesses that are fundamentally different from the company's core business, which can lead to difficulties in managing these businesses competently. Additionally, there is a limited potential for cross-business strategic fit or shared resources, leading to a lack of competitive advantage.

Two Important Negatives of Unrelated Diversification Are