Question

Which of the following may be true for a company pursuing a strategy of unrelated diversification rather than a strategy of related diversification? a. The company has to achieve coordination between business units. b. The company has narrow organizational competencies. c. The company has superior strategic management and organizational design. d. The company has no bureaucratic costs that arise from the number of businesses in its portfolio. e. The company has no difficulty in keeping its corporate managers informed about the complexities of each business.

Answer 1

c. The company has superior strategic management and organizational design

Step-by-step explanation:

Strategic management refers to developing and implementing such strategies that lead to judicious and optimal use of an organizational resources, utilizing strengths and minimizing weaknesses and ensuring that all organizational activities work in synchronization towards attainment of long term organizational goals.

Organizational design refers to alignment of an organizational structure which comprises of organizational hierarchy, departments, reporting responsibilties, level of delegation, etc with organizational objectives, with focus upon efficiency and effectivenenss.

Diversification refers to expansion by a business by adding new products to it's existing portfolio and exploring new markets.

Under Unrelated diversification, the products added to the existing product line are entirely different, unrelated and offered in new markets where previously such business had no product offerings.

An unrelated diversification is a risky form of diversification as it involves unpredictability and unfamilarity w.r.t market response and requires high degree of innovation.

Such form of diversification is usually resorted to by those companies who possess superior strategic management, an adaptable organizational design and high degree of product innovation.