The Risk for Firms That Follow the Unrelated Diversification Strategy

question 72

Multiple Choice

The risk for firms that follow the unrelated diversification strategy in developed economies is that:

• A) external investors tend to dump the stocks of conglomerates during economic downturns.
• B) conglomerates are typically owned by one powerful entrepreneur and do not survive his/her retirement or death.
• C) government regulations, especially in Europe, have periodically forced the dissolution of conglomerates.
• D) competitors can imitate financial economies more easily than they can replicate the value gained from the economies of scope developed through operational relatedness and corporate relatedness.

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