A Strategy Based on Diversification May Fail to Add Value

question 52

Multiple Choice

A strategy based on diversification may fail to add value because companies:

• A) seek to achieve differentiation instead of low cost.
• B) diversify into areas in which they have some knowledge and miss out on profitable opportunities in other areas.
• C) make acquisitions rather than develop new technologies on their own.
• D) incur bureaucratic costs that exceed the value created by the strategy.
• E) seek to achieve a low-cost position instead of differentiation.

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Definitions:

Trade Associations

Organizations founded and funded by businesses operating in a specific industry, aimed at promoting common interests, sharing information, and often influencing public policy.

Competitive Advantage

The ability of a company or business to perform in a way that allows it to outperform its competitors.

High-Performance Climates

Environments within organizations that foster exceptional performance levels through motivating and engaging employees.

Dynamic Environment

A situation or context that is constantly changing, often unpredictably, requiring flexibility and quick adaptation.