Question

Diversifying into new businesses is justifiable only if it:A. results in increased profit margins and bigger total profits. B. builds shareholder value. helps a company escape the rigors of competition in its present business. C. leads to the development of a greater variety of distinctive competencies and competitive capabilities. D. helps the company overcome the barriers to entering additional foreign markets.

Answer 1

Builds shareholder value

Step-by-step explanation:

Diversification refers to the extending of a business by entering into a completely new sector or investing in a business which is entirely different to the scope of the company’s existing product line. Businesses use this method for controlling risk by potential threats experienced during the economic decline.

Diversification is a form of growth strategy. The purpose of diversification is to enable the company to penetrate into lines of business that are different from their current operations.