Which statement best describes ABC's diversification move?

Which statement best describes ABC's diversification move?

• A. It is a strategic retrenchment within the same market.
• B. It is diversification into a different business activity.
• C. It is a financial restructuring only.
• D. It is a branding exercise.

Answer: (B)

Diversification means expanding into a different business activity from the current operations. ABC’s move fits this because it involves entering a new area beyond its existing products or markets, aiming to broaden growth and spread risk. It isn’t retrenchment (which would mean pulling back or narrowing scope), nor is it merely a financial restructuring (which changes capital structure or finances) or a branding exercise (which focuses on image rather than what the company actually does).

Diversification means expanding into a different business activity from the current operations. ABC’s move fits this because it involves entering a new area beyond its existing products or markets, aiming to broaden growth and spread risk. It isn’t retrenchment (which would mean pulling back or narrowing scope), nor is it merely a financial restructuring (which changes capital structure or finances) or a branding exercise (which focuses on image rather than what the company actually does).