Question

Which of the following is a disadvantage of growth by means of external growth strategies? Group of answer choices Diversification of business risk Economies of scale Getting access to proprietary products or services Reducing competition Loss of organizational flexibility

Answer 1

- Loss of organizational flexibility

- Diversification of business

Step-by-step explanation:

Remember, External growth strategies unlike the Internal growth strategies involves using external assistance to grow the organization, such as merging or acquiring other companies, franchising or forming joint ventures.

In such a case, organisational flexibility could be lost since the organization becomes more complex as a result of bringing in more people into the organization. Also, another disadvantage is that with a restructured management team, the business may experience unexpected diversification into other products as in the case of joint ventures.