Which growth strategy involves combining or acquiring businesses to spread risk across products and markets?

Which growth strategy involves combining or acquiring businesses to spread risk across products and markets?

• A. diversification
• B. barriers to entry
• C. external growth
• D. economies of scale

Answer: (A)

Diversification is a growth approach that reduces risk by expanding into new products and new markets. By not relying on a single product or region, a company can offset poor performance in one area with successes in others, creating a more balanced overall performance. This can happen through related diversification (adding similar or complementary products/markets) or unrelated diversification (entering completely different areas). When growth occurs by combining with or acquiring another business in a different product line or market, the underlying aim is to broaden the portfolio to spread risk, even though the activity is a form of external growth. Other options describe different ideas (reducing costs through scale, barriers to entry, or growth via mergers generally) and don’t capture the explicit goal of spreading risk across products and markets.

Diversification is a growth approach that reduces risk by expanding into new products and new markets. By not relying on a single product or region, a company can offset poor performance in one area with successes in others, creating a more balanced overall performance. This can happen through related diversification (adding similar or complementary products/markets) or unrelated diversification (entering completely different areas). When growth occurs by combining with or acquiring another business in a different product line or market, the underlying aim is to broaden the portfolio to spread risk, even though the activity is a form of external growth. Other options describe different ideas (reducing costs through scale, barriers to entry, or growth via mergers generally) and don’t capture the explicit goal of spreading risk across products and markets.