True or false: Related diversification is more likely to generate incremental value than unrelated diversification.True false question.TrueFalse

True.

Related diversification occurs when a company expands its operations into areas that are closely related to its existing business activities. This strategy can generate incremental value because it leverages existing capabilities, resources, and market knowledge, leading to synergies that can enhance performance. For instance, a company that manufactures bicycles might diversify into producing bicycle accessories, utilizing its expertise in production, distribution, and marketing.

In contrast, unrelated diversification involves entering into businesses that are not related to the current operations. While it can reduce risk by spreading investments, it often lacks the operational synergies and competitive advantages present in related diversification. As a result, unrelated diversification may not generate the same level of incremental value.

Therefore, the statement is true; related diversification is more likely to generate incremental value compared to unrelated diversification.