Firms have several choices of diversification initiatives that can be used to create value. Which of the following is not one of them?

a. using unrelated diversification to acquire financial synergies

b. using related diversification to acquire market power

c. using related diversification to acquire parenting and restructuring synergies

d. using related diversification to acquire economies of scope

Question

River Flynn

Business

2 November, 16:04

Firms have several choices of diversification initiatives that can be used to create value. Which of the following is not one of them?

a. using unrelated diversification to acquire financial synergies

b. using related diversification to acquire market power

c. using related diversification to acquire parenting and restructuring synergies

d. using related diversification to acquire economies of scope

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Answers (1)

Know the Answer?

Chiquita · Answer 1

C. using related diversification to acquire parenting and restructuring synergies

Explanation:

When diversification initiatives are being used to create value, a business organization needs to separate its capital into different sectors in order to make sure that benefit that both customers and shareholders received from the operation is increased.

Parenting synergy only give the authority about a business decision to another organization (usually bigger and more experienced). It does not guarantee that the consumers or shareholders would be benefited in any way. It even might create larger risk for shareholders since they become uncertain how the new management will operate.