Diversification involves entering new products or markets. Which statement about related diversification is correct?

• A. Lacks any Link to Current Operations
• B. Diversification Involves Entering New Products or Markets; Related Diversification Is Characterized by Shares Connections with Existing Activities
• C. Only Expands into Services
• D. Requires Divestment of Core Business

Answer: (B)

Related diversification means expanding into new products or markets that still have meaningful connections to what the company already does. This linkage allows the firm to share resources, knowledge, distribution channels, or brands, creating economies of scope and easier integration. That shared activity distinguishes related diversification from unrelated diversification, where there are no obvious connections to current operations. So the statement that correctly describes related diversification is the one that notes diversification into new products or markets while highlighting the shared connections with existing activities. The other statements don’t fit: there being no link describes unrelated diversification; expanding only into services is too narrow since diversification can involve products, services, or both; and requiring divestment of the core business is not a defining feature of related diversification.