Which growth strategy spreads risk across multiple products and markets?

• A. external growth
• B. diversification
• C. barriers to entry
• D. economies of scope

Answer: (B)

Diversification spreads risk across multiple products and markets by broadening what a company sells and where it sells it. When a business isn’t tied to a single product or a single geographic region, downturns in one area are less likely to hit overall performance hard. You can diversify by adding new product lines, entering different geographic markets, or even acquiring firms in different industries.

External growth is about growing through mergers, acquisitions, or alliances, which can lead to diversification but isn’t defined by spreading risk across products and markets. Barriers to entry are obstacles that protect incumbents from new competitors, not a growth approach. Economies of scope involve cost savings from producing multiple products together, which can support diversification but don’t in themselves describe spreading risk across different products and markets.