Question

In business strategy, the concept of diversification involves expanding a company’s operations into new markets or product lines to reduce risk and enhance growth potential. Though, diversification can lead to increased revenue streams and a more resilient business model, critics contend that diversification can dilute a company’s core competencies and result in inefficiencies, ultimately harming overall performance.
Which of the following assumption would allow the above statements to be properly drawn?

• A. Companies often face significant challenges when trying to manage multiple product lines effectively
• B. Diversification strategies usually require little investment and resources
• C. A strong focus on core competencies is essential for maintaining optimal output
• D. Both a) and c) above

Answer 1

Answer: (D)

Both a) and c) above

Answer 2

For diversification to dilute core competencies and lead to inefficiencies, it is important to assume that managing multiple product lines is challenging (A) and that maintaining a strong focus on core competencies is essential (C). This assumption supports the argument that diversification could negatively impact performance.
Thus, the correct answer is Option (D).