Final answer:
Unrelated diversification in business is a strategy where a company expands into non-similar activities, potentially increasing shareholder value but also risking a diversification discount. Financial investors recommend a diversification strategy in investing to reduce the risk associated with unfavorable market conditions or management decisions. The stock market is where one can purchase stocks to build a diversified portfolio. The correct option is b.
Step-by-step explanation:
The concept of unrelated diversification refers to a business strategy where a company expands into activities that are distinct from its current operations. This type of diversification might be driven by a desire to increase shareholder value by venturing into new markets or industries.
However, it can sometimes lead to a diversification discount, where the market values the diversified company less than if it were a collection of separate, focused entities. To mitigate risks, financial investors often recommend portfolio diversification—investing in a wide range of companies to cancel out extreme increases and decreases in value.
To purchase stocks, one can go to the stock market, and the rationale behind diversification is to avoid putting "all your eggs in one basket," thus protecting against unfavorable market conditions or poor managerial decisions.
Beyond these factors, discrimination within a company can lead to market pressures that force change if the business practices are causing harm to its reputation or the retention of its employees. The correct option is b.