Question

The 2 biggest drawbacks of pursuing unrelated diversification strategies are

1. 1 no potential for competitive advantage beyond any benefits of corporate parenting and when each individual business can generate on its own and 2 demanding managerial requirements.

2. Including likelihood that the company’s finance resources will be spread thinly over too many distinctly different lines of business and 2 the high risks of conflicts and or incompatibility among the strategies of businesses it has diversified into.

3. the likelihood of overspending on efforts to capture economies of scope and 2 difficulty in passing the industry attractiveness test when making new acquisitions.

4. weak ability to capture cross business resource fits and 2 2 conflicts incompatibility among the competitive strategies of the company’s different businesses

Answer 1

Option 1

Unrelated diversification relates to adding up new business which is not related to core competences. Hence it demands more managerial requirements and limited competitive advantage potential