Retrenching to a Narrower Diversification Base Can Be Attractive or Advisable

question 22

Multiple Choice

Retrenching to a narrower diversification base can be attractive or advisable EXCEPT when:

• A) certain businesses have questionable long-term potential.
• B) a diversified company has businesses that have little or no strategic or resource fits with the "core" businesses that management wishes to concentrate on.
• C) certain business units are weakly positioned and show poor prospects for providing a good return on investment.
• D) market conditions in a once-attractive business have badly deteriorated.
• E) business units are cash cows with promising futures.

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Definitions:

Capacity Allocation

The process of distributing resources and production capacity among various products, services, or activities to efficiently meet demand and optimize output.

Utilization

The extent to which a system, resource, or component is used relative to its total capacity, typically expressed as a percentage.

Higher Costs

Increased expenses or financial outlays in comparison to a baseline or expected level, affecting profitability.

Positive Externalities

Benefits that occur as a result of an economic activity which positively affect individuals or entities not directly involved in the activity.