A Big Advantage of Related Diversification Is That

question 39

Multiple Choice

A big advantage of related diversification is that:

• A) it offers ways for a firm to realize 1 + 1 = 3 benefits because the value chains of the different businesses present competitively valuable cross-business relationships.
• B) it is less capital intensive and usually more profitable than unrelated diversification.
• C) it involves diversifying into industries having the same kinds of key success factors.
• D) it is less risky than either vertical integration or unrelated diversification due to lower capital requirements.
• E) it passes the industry attractiveness test and thus offers the best route to 2 + 2 = 4 benefits.

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Definitions:

Budget Variance

This is the difference between the budgeted or planned amount of expense or revenue, and the actual amount incurred or received.

Standard Hours

The set amount of time expected to complete a job or task, often used for planning and assessing the efficiency of operations.

Volume Variance

The difference between the budgeted volume of production and the actual volume, which affects the fixed overhead costs.

Direct Labor-Hours

A measure of the total hours worked by employees who are directly involved in the production process of a company's products or services.