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

Sundaram Auto Components makes precision gears and has built deep expertise in metallurgy. It now uses the same expertise to enter wind-turbine gearboxes and railway components. Which statement best describes this strategy?

The firm is leveraging its core competence in metallurgy across related businesses to create synergy. Because the new products share the same skill base, this is related diversification, not unrelated portfolio diversification, retrenchment or backward integration.

  1. ALeveraging a core competence across related businesses to create synergyCorrect
  2. BUnrelated diversification driven by financial portfolio balancing
  3. CRetrenchment through divestment of the core business
  4. DBackward integration to secure raw material supply

Explanation

The firm applies one shared capability, metallurgy expertise, in several markets. This is related diversification built on a core competence, creating synergy through shared skills. Unrelated diversification would have no common skill base, and the case involves no divestment or supply-chain integration.

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