The Risk for Firms That Follow the Unrelated Diversification Strategy

question 81

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 imitate economies of scope.

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Definitions:

American Automobile

The industry and culture surrounding the manufacturing, marketing, and use of cars and trucks in the United States.

General Motors

An American multinational corporation headquartered in Detroit that designs, manufactures, markets, and distributes vehicles and vehicle parts.

Raw Material

Fundamental substances in their natural, modified, or semi-processed state, used as inputs to production or manufacturing.

Affluence

The state of having a great deal of wealth or material goods; prosperity.