DECA Retail Merchandising Practice Exam

What term describes a retailer that has little commonality between existing and new business ventures?

1. Unrelated diversification

2. Related diversification

3. Vertical integration

4. Horizontal integration

The correct answer is: Unrelated diversification

The term that accurately describes a retailer with little commonality between existing and new business ventures is unrelated diversification. This concept refers to a strategic approach where a company enters into markets or industries that are significantly different from its current operations. For retailers, this means expanding into product lines or services that do not share operational or market similarities with their existing offerings. Unrelated diversification can help businesses spread risk across different industries, enabling them to take advantage of new market opportunities that may not be impacted by the performance of their original business. By engaging in unrelated ventures, retailers can potentially increase overall revenue streams and create a buffer against downturns in their primary market. In contrast, related diversification involves entering markets or product lines that are aligned or share certain characteristics with existing operations, while vertical and horizontal integrations refer to strategies that either incorporate different levels of the supply chain or expand market share within the same industry, respectively. Therefore, unrelated diversification distinctly characterizes the situation in which a retailer lacks commonality between its existing and new business activities.