Question

Given below are two statements:
Statement I : ‘Diversification’ means adding new lines of business.
Statement II : Differentiation means creating specialized products that gain competitive advantage with a particular segment of the market. In light of the above statements, choose the correct answer from the options given below

• A. Both Statement I and Statement II are true
• B. Both Statement I and Statement II are false
• C. Statement I is true but Statement II is false
• D. Statement I is false but Statement II is true

Answer 1

The Correct Option is A

To determine the correctness of the given statements, we need to understand the concepts of 'Diversification' and 'Differentiation' in the context of business strategy.

1. Understanding Statement I:
   • Diversification is a corporate strategy to enter a new market or industry which the business is not currently in, while also creating a new product for that new market.
   • The idea is to add new lines of business to leverage factors such as new product launches, new technologies, and wider customer bases.
   • Thus, Statement I, which states that 'Diversification means adding new lines of business', is true.
2. Understanding Statement II:
   • Differentiation is a strategy where a company develops unique products or services to create a competitive advantage in a specific segment of the market.
   • This often involves offering products with special features, higher quality, or superior service that are targeted to meet the demands of a particular customer group.
   • Therefore, Statement II, which mentions 'Differentiation means creating specialized products that gain competitive advantage with a particular segment of the market', is also true.

Conclusion:

Both statements accurately describe their respective business strategies. Therefore, the correct answer is: Both Statement I and Statement II are true.