The Two Biggest Drawbacks or Disadvantages of Unrelated Diversification Are

question 45

Multiple Choice

The two biggest drawbacks or disadvantages of unrelated diversification are

• A)underemphasizing the importance of resource fit and the strong likelihood of diversifying into businesses that top management does not know all that much about.
• B)insufficient cash flows to finance so many different lines of business and a lack of uniformity among the strategies of the businesses the company has diversified into.
• C)volatile sales and profits and making the mistake of diversifying into too many cash cow businesses.
• D)the difficulties of competently managing a set of fundamentally different businesses and having a very limited competitive advantage potential that cross-business strategic fit provides.
• E)overinvesting in the achievement of economies of scope and the difficulties of achieving a good mix of cash cow and cash hog businesses.

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Definitions:

Oil Quality

A measure of the chemical and physical properties of an oil, determining its suitability for specific uses.

Regression Equation

A mathematical formula used to predict a dependent variable based on one or more independent variables.

Outliers

Data points that significantly differ from the majority of a dataset, often indicating a deviation from the norm.

Residuals

The differences between observed and predicted values in a regression analysis, representing the error not explained by the model.