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What is a key characteristic of a related diversification strategy?

Reducing competition in the market

Utilizing shared resources for economies of scope

A key characteristic of a related diversification strategy is the utilization of shared resources for economies of scope. This means that a company diversifies its operations by expanding into markets or products that are related to their existing business, allowing them to leverage their current capabilities, technologies, and distribution channels. By doing this, the organization can reduce costs and improve efficiency, as the shared resources contribute to more effective operations across the diversified segments.

Related diversification enables a firm to capitalize on existing strengths while entering new markets that share similar operational characteristics or customer bases. This approach not only enhances the firm’s competitive advantage but also allows for better risk management, as a strong position in related fields can provide stability and growth opportunities.

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Expanding into unrelated markets

Increasing the number of product offerings

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