In Companies Pursuing a Strategy of Unrelated Diversification

question 104

Multiple Choice

In companies pursuing a strategy of unrelated diversification:

• A) the main basis for competitive advantage and improved shareholder value is an increased ability to achieve economies of scope.
• B) each business is on its own in trying to build a competitive edge and the consolidated performance of the businesses is likely to be no better than the sum of what the individual businesses could achieve if they were independent.
• C) there is a strong chance that the combined competitive advantages of the various businesses will produce a 1 + 1 = 3 performance outcome as opposed to just a 1 + 1 = 2 performance outcome.
• D) the main basis for improved shareholder value is strong cross-business financial fits.
• E) the main basis for improved shareholder value is an increased ability to achieve economies of scale in the businesses it has entered.

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Definitions:

Foreign Assets

Investments in foreign countries, including stocks, bonds, real estate, or direct investments in business ventures.

Current Account

Part of a country's balance of payments, it includes the trade balance, net income from abroad, and net current transfers.

Capital Account

A national account that records transactions involving the purchase and sale of assets, such as property rights and stocks, between residents and non-residents.

Personal Savings Rate

The percentage of personal disposable income that is saved by households rather than spent on consumption.