Question

Explain the difference in related and unrelated diversification. Identify two companies that have achieved earning's growth through related diversification and two that have achieved such growth in unrelated diversification. Explain the basis for your examples.

Answer 1

Explain the difference in related and unrelated diversification

• Related diversification provides the potential to attain synergies by the sharing of skills, whereas Unrelated diversification lacks sharing of skills due to lack of commonality in markets, distribution channels etc.
• Related diversification is when a business expands its existing product lines or markets,  whereas Unrelated diversification is when a business adds new, or unrelated, product lines or markets
• Related diversification has an advantage of understanding the business and understanding industry opportunities and threats, whereas Unrelated diversification helps in increasing cost efficiencies

Identify two companies that have achieved earning's growth through related diversification and two that have achieved such growth in unrelated diversification. Explain the basis for your examples.

Two companies that have achieved earning's growth through related diversification are-

1. Campbell Soup Company
2. Laser Company(technology)

Two companies that have achieved earning's growth through unrelated diversification are-

• W. R. Grace
• Textron Inc.