3.5 Decision making to improve Financial performance

Question 1

What company is an example of diversification

Answer 1

Uber
Uber eats
Uber drive

Question 2

What’s diversification

Answer 2

Diversification involves targeting new products at new markets to increase sales.

Question 3

Benefits of diversification

Answer 3

Diversification can spread risk as it gives businesses an alternative if the demand for one product declines.
Economies of scope

Question 4

What are businesses that are able to raise more debt, more likely to be able to do?

Answer 4

Expand into new geographical markets or new products

Question 5

What’s the benefits of being a more diversified business?

Answer 5

More diversified businesses pay lower interest rates/ lower costs of debt.
Due to the business being less likely to file for bankruptcy or become insolvent

Question 6

Evaluation of diversified business?

Answer 6

They are competing with businesses that operate with one market and one product. Does the lack of strategic focus harm the business?