Question

Which of the following is most likely the best rationale for unrelated diversification? A. risk reduction by spreading the company's investments over a set of diverse industries B. managerial motives including the prospects for higher compensation C. stabilize earnings, i.e. market downtrends in some of the company's businesses will be partially offset by cyclical upswings in its other businesses D. expectations for rapid or continuous growth E. growth by acquisition of an undervalued company at a bargain price can deliver enhanced shareholder value

Answer 1

Option A

Step-by-step explanation:

In simple words, Unrelated diversification relates to the type of diversification where new or incompatible consumer products are introduced and new businesses enter. For eg, when the shoe manufacturer joins the garment fabrication business.

Linked diversification is more important than unrelated since the organisation shares properties, expertise, or abilities. Yet other profitable companies tend to purchase unrelated enterprises, along with Tyco as well as GE. Thus, from the above we can conclude that the correct option is A.