Final answer:
Excess capacity in Cherrywood Fine Furniture Company can be best utilized through related diversification, allowing expansion into new but similar markets, maximizing efficiency and broadening product lines while optimizing resource use.
Step-by-step explanation:
The Cherrywood Fine Furniture Company's excess capacity in its plant and equipment can be leveraged for related diversification. This approach involves expanding into new business areas that are closely related to the company's existing operations. Related diversification enables a company to use its excess capacity to broaden its product lines or services, which can lead to synergies and increased efficiency. This is in contrast to unrelated diversification, where a company expands into areas that are not connected to its current business activities.
An example of related diversification might be using excess capacity to create a new line of home office furniture, which complements the company's existing product range of residential furniture. This can also help in corporate restructuring by optimizing resource use and potentially opening new revenue streams. However, the concept of related diversification does not align with multipoint competition, which deals with a strategy where companies compete against each other in several markets simultaneously.