The Two Biggest Drawbacks or Disadvantages of Unrelated Diversification Are

question 17

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 it 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.