Final answer:
The primary disadvantages of unrelated diversification are demanding managerial requirements and limited competitive advantage potential. Management can become overextended in managing diverse industries with few synergies. Additionally, a lack of financial fit and underestimated competition can threaten business stability and profitability.
Step-by-step explanation:
The two biggest drawbacks or disadvantages of unrelated diversification are: c. demanding managerial requirements and limited competitive advantage potential that cross-business strategic fit provides. Unrelated diversification can often lead to a scenario where management is stretched thin due to the need to understand and run businesses in completely different industries, which can be highly demanding. Moreover, the potential for achieving competitive advantage through strategic fit across these diverse businesses is generally low, as there are few if any, synergies to be leveraged.
Another key concern is that unrelated businesses may not support one another leading to a lack of financial fit, potentially draining resources from more profitable divisions. Additionally, competition in new industries may be underestimated, resulting in businesses facing stronger rivals with better or cheaper products. This could decrease profits, and in extreme cases, lead to business failure, affecting many stakeholders including workers and managers.