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CS Professional · Strategic Management and Corporate Finance · Managing the Multi-Business Firm and Analyzing Strategic Edge

A company that makes steel pipes begins manufacturing automobile seats, a business with no technological or market link to its existing operations. Which diversification strategy is this?

This is conglomerate diversification, because the firm enters a business that has no technological, marketing or market relationship with its present operations. Concentric diversification needs some link, and integration strategies involve the same industry chain or competitors.

  1. AHorizontal integration
  2. BConcentric diversification
  3. CConglomerate diversificationCorrect
  4. DBackward vertical integration

Explanation

Conglomerate diversification means entering a business unrelated to the existing products, technology or markets. Concentric diversification requires some technological or marketing link, which is absent here. Horizontal integration involves acquiring competitors in the same line, and backward integration means moving into supply of inputs.

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