Question

The downside of synergy in a diversified firm is

a. increasing independence of businesses.
b. the reduction of activity sharing.
c. excessive focus on risky innovation.
d. the loss of flexibility.

Answer 1

The downside of synergy in a diversified firm is the loss of flexibility.

Step-by-step explanation:

The downside of synergy in a diversified firm is the loss of flexibility.

When companies diversify and combine different business units, they may become less flexible in responding to changes in the market or taking advantage of new opportunities. The different business units may have different needs, goals, and strategies, which can lead to conflicts and difficulties in making quick decisions.

For example, if a diversified firm wants to enter a new market, it may be difficult to coordinate the efforts of the different business units to achieve that goal. Each unit may have its own priorities and ways of doing things, which can slow down the decision-making process and reduce the firm's ability to respond quickly to market changes.