Conglomerate diversification is expansion into unrelated business areas. True or False?

• A. True
• B. False
• C. Not stated
• D. Not applicable

Answer: (A)

Conglomerate diversification means expanding into business areas that are unrelated to the company's existing operations. This approach grows the firm by entering industries with little or no common link in products, markets, or technologies, rather than building on current capabilities. It contrasts with related diversification, where new ventures share some relationship with the existing business (such as similar customers, channels, or processes). The statement is true because the essence of conglomerate diversification is exactly entering unrelated fields to spread risk and redeploy capital across diverse operations. It can bring benefits like risk reduction and more opportunities for capital allocation, but it also adds management complexity and can dilute focus if not well coordinated.