Companies that pursue related diversification are able to create a diversification premium because they
A) are able to leverage time compression economies.
B) can operate beyond the minimum efficient scale.
C) are able to increase value due to economies of scope.
D) can reduce the value gap created by its products.

Question

Quizplus · Accepted Answer

Companies that pursue related diversification are more likely to improve their performance. They create a diversification premium. At the most basic level, a corporate diversification strategy enhances firm performance. For diversification to enhance firm performance, it must do at least one of the following: provide economies of scale, exploit economies of scope, or reduce costs and increase value.

Companies That Pursue Related Diversification Are Able to Create a Diversification