As a qualified Management Accountant you have been asked by a non-financial manager to explain...

Question

As a qualified Management Accountant you have been asked by a non-financial manager to explain the CEO's recent comments, featured in the CEO's regular update to investors and analysts.

The CEO's update suggested the company, an established property development business, was about to pursue an exciting strategy. The strategy is to focus on conglomerate diversification, to be achieved through a number of pre-identified acquisitions, with the aim of significantly increasing shareholder value.

Which of the following statements is consistent with the concept of conglomerate diversification?

Accepted Answer

D. A portfolio of businesses involved in unrelated activities such as financial services, food retailing and property development, sharing nothing but a parent company.

Answer

A. A strategy involving business expansion within a company's present industry. For this company, an example would be the acquisition of another property development business.

Answer

B. A structure involving a collection of unrelated businesses. For this company, acquisitions may include a variety of companies such as financial services and food retailing, all sharing operational relationships such as finance, sales and marketing.

Answer

C. A portfolio of unrelated businesses such as financial services, food retailing and property development, all sharing identity and risk, including group logo, corporate uniforms and risk management systems.

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CIMA Strategic E3 Question # 63 Topic 7 Discussion

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