Define the terms unrelated diversification and related diversification.

Unrelated diversification refers to a business strategy in which a company expands its operations into unrelated industries or markets that are distinct from its current business activities. This type of diversification involves entering into new industries or markets that the company has no prior experience or expertise in.

Related diversification, on the other hand, involves expanding a company's operations into industries or markets that are closely related to its current business activities. This type of diversification typically involves leveraging existing capabilities, resources, and expertise to enter into new markets or industries that are related to the company's core business.

Unrelated Diversification

- Acquiring businesses in industries or markets that are unrelated to the company's existing operations.
- No strategic connection or overlap between the acquired businesses and the core business.
- Aims to reduce risk by investing in different industries that are not correlated with each other.

Related Diversification

- Acquiring businesses that operate in related industries or have complementary products or services.
- Strategic connections and overlap between the acquired businesses and the core business.
- Aims to leverage existing resources, capabilities, and customer base to create synergies and enhance overall performance.