Question

Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue? Group of answer choices Steady industry conditions Decreasing bureaucratic costs Varying firm-specific conditions Greater differentiation of products Diversification for pooling risk

Answer 1

Diversification for pooling risks

Step-by-step explanation:

When a company wants to diversify it goes into various products in order to reach a larger market. This is the opposite of specialisation where the company focuses on one market or product.

When a company wants to diversify it will not be a good idea to do it because they want to pool risk.

Pooling of risk involves centralisation of process so that risk due to variability will be reduced.

Diversifying will increase risk due to variability.