Related diversification provides the potential to share skills and resources. Unrelated diversification can balance the cash flow.
The skill of entering product markets that are distinct from those in which the company is currently active is known as diversification. To categorize diversification into related and unrelated diversification is useful. Related diversification offers the chance to create synergy through the sharing or exchanging of resources or expertise. Unrelated diversification to one another lacks the commonalities in markets, distribution channels, production technology, and R&D focus needed to create opportunities for collaboration through the sharing or trading of resources or competencies.
The cash flows of SBU entities can be balanced through unrelated diversification. A company with numerous SBUs that are worthy of investment may decide to buy or merge with a cash cow in order to increase its cash flow.
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