A Key Issue in Companies Pursuing an Unrelated Diversification Strategy

question 70

Multiple Choice

A key issue in companies pursuing an unrelated diversification strategy is:

• A) how wide a net to cast in building a portfolio of unrelated businesses.
• B) whether to keep or divest businesses whose technological approaches do not match the overall technology and R&D strategy of the corporation.
• C) how quickly to divest businesses whose competitive strategies do not closely match the competitive strategies of sister businesses.
• D) whether to build shareholder value via paying higher dividends or via actions aimed at increasing the company's stock price.
• E) whether to acquire new businesses that offer the potential for achieving greater economies of scope or businesses that offer the potential for achieving greater economies of scale.

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Definitions:

Economies of Scale

Cost advantages that a business obtains due to expansion, where the average cost per unit of output decreases with the increase in scale of production.

Functional Organizations

A type of organizational structure that groups employees based on their specialized roles or functions.

Functional Expertise

The specialized knowledge or skills in a specific field or function, contributing to organizational success.

Economies of Scale

Cost advantages that enterprises obtain due to scale of operation, with cost per unit of output generally decreasing with increasing scale.