Question

When diversification combines two businesses in different industrial sectors, the key determinant of whether the diversification creates value is whether the diversification?

Answer 1

, the key determinant of whether the diversification creates value would be: whether the diversification enhances the competitive advantage of either or both of the two businesses

Here is an example of business combination in different sectors that create a value.

Let's say that a mobile manufacturer called company x (from electronic sector) combines its-self with an animation company (from entertainment sector).

Company x could obtain value from this combination by rewarding free movie/tv shows subscription for every mobile phone that they sold. By doing this, the sales in both sectors will be increased