What is the primary focus of companies that pursue a related diversification strategy?

Companies that pursue a related diversification strategy focus on creating or acquiring businesses that have similar products or are within the same industry or market sector. This strategy allows a company to leverage its existing capabilities, resources, and synergies across related businesses. By diversifying into areas that are related to their core operations, companies can benefit from economies of scale, share technology, streamline operations, and enhance their competitive advantage.

For example, a company that manufactures electronic devices may diversify into producing related products, such as accessories or complementary technology. This related diversification helps the company to strengthen its brand recognition and customer loyalty, as consumers may choose to buy additional products from a brand they already trust.

In contrast, pursuing unrelated diversification would involve entering markets that have no direct correlation with the company's current products or operations, which can lead to challenges in management and focus. Similarly, reducing operational costs or acquiring companies with different cultures does not align with the primary focus of related diversification. Instead, related diversification emphasizes the strategic alignment and synergy that can be achieved through similar markets or products.