A Strategy Based on Diversification May Fail to Add Value

question 70

Multiple Choice

A strategy based on diversification may fail to add value because companies

• A) seek to achieve differentiation instead of low cost.
• B) diversify into areas in which they have some knowledge and miss out on profitable opportunities in other areas.
• C) make acquisitions rather than develop new technologies on their own.
• D) incur bureaucratic costs that exceed the value created by the strategy.
• E) seek to achieve cost leadership instead of differentiation.

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Definitions:

Randomized Design

An experimental design in which subjects are randomly allocated to different groups to ensure that each has an equal chance of receiving any of the treatments.

Population Variances

The variances of different populations, measuring the dispersion of a set of values relative to their mean.

Equal-Variances T-Test

A statistical test comparing the means of two independent samples, based on the assumption that both groups have similar variances.

F-Test

A statistical test used to compare the variances of two populations to see if they are significantly different.