Question

Diversification ought to be considered when a A. D) company has run out of ways to achieve a distinctive competence in its present business. B. C) company begins to encounter diminishing growth prospects in its mainstay business. C. A) company's profits are being squeezed, and it needs to increase its net profit margins and return on investment. D. B) company lacks sustainable competitive advantage in its present business. E. E) company is under the gun to create a more attractive and cost-efficient value chain.

Answer 1

Answer: B. C) company begins to encounter diminishing growth prospects in its mainstay business.

Explanation:

All Companies should endeavour for Growth. Growth means survival in this world and a company that is not growing will eventually die out.

If a Company begins to experience a situation where the prospects for growth in their chosen industry is reducing, they should, in the interest of their survival, seek alternative business that they can engage in. Look at Oil Companies like Shell for instance, they realize that Fossil Fuels will not last forever and have started investing massively in Clean Energy because they can see that Growth Prospects in Oil are starting to diminish.