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7.5. Under what conditions will a related diversification strategy not be a source of competitive advantage for a firm? Pg. 1
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Related diversification works on economies of scope. The related diversified companies work because they exploit economies of scope and earn a competitive advantage. In case, economies of scope cannot be achieved the company cannot enjoy a competitive advantage. It may be possible that the relatedness is based on relatively loose links among the business leading to no great possibility of achieving economies of scope for the company and therefore not achieving competitive advantages.

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