Question

Polaris, a manufacturer of snowmobiles, motorcycles, watercraft, and off-road vehicles, shares manufacturing operations across its businesses. It also has a corporate research and development facility and staff departments that support all the Polaris operating divisions. This isan example of creating value by usingA) related diversification to acquire market value by leveraging core competencies.B) related diversification to acquire economies of scope by sharing.C) unrelated diversification to acquire financial synergies through portfolio management.D) related diversification to acquire parenting, restructuring, and financial synergies through corporate restructuring and parenting.

Answer 1

Answer: B. related diversification to acquire economies of scope by sharing.

Explanation: Related diversification happens when a company expands or add to its existing production line or market. It is a process that occurs when a company expands its business into product line similar to the ones it is offering currently.

Economies of scope is an economic concept, it emphasis that the unit cost of producing a product will decline as the variety of product produced increases. That is the total cost will reduce the more different but similar product are produced.

Polaris operate on related diversification and economies of scope, it produces different but similar product that are related in production.