When diversifying in related businesses, such as horizontal relationships, the firm benefits from leveraging core competencies and sharing activities. As such, this enables the firm to gain from economies of scale. An example of this is when a sporting goods store, with one or several locations may acquire retail stores carrying other product lines. This leads to leverage, by reusing many of its resources.
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The concepts in this statement are true, but there's a problem with the example given. The benefits are correct that arise from a horizontal relationship. If a sporting goods store acquired a retail store that carried ...
This solution discusses the diversification question presented. A thorough explanation is provided.