Final answer:
The correct answer is option (b) 'there is more potential to realize profit-enhancing benefits' in related diversification due to shared knowledge, cost savings, economies of scale, and better transfer of technologies among business units.
Step-by-step explanation:
The question, “The more commonalities that can be formed between business units, the more beneficial it is in related diversification because…” pertains to the concept of related diversification in business strategy. When a company diversifies its business units while maintaining a certain level of similarity or commonality between them, it can potentially leverage several advantages.
Option (b) 'there is more potential to realize profit-enhancing benefits' is the correct answer. Related diversification allows companies to benefit from shared knowledge, cost savings due to economies of scale, and transfer of best practices and technologies among business units. This collaboration can lead to increased competitiveness and profitability. It's a strategic approach that integrates the advantages of specialization, economies of scale, and variety to the benefit of the company.
Through related diversification, a company can exploit complementarities in manufacturing, marketing, research and development, and distribution, contributing to a more efficient operation overall and enhancing the potential for profit. As companies merge and grow, they can reinvest profits into expansion, and similarly, multinationals can open up new opportunities in foreign markets. These strategic moves can benefit both businesses and customers, providing a broader range of products and fostering robust competition.