What does unrelated diversification involve?

Unrelated diversification involves acquiring companies in different industries that are not connected to the company's existing operations. This strategy allows a business to spread its risk and enter new markets that may not be related to its current product offerings. By diversifying into unrelated areas, a company can potentially benefit from new revenue sources, mitigate risks associated with its core business, and leverage its financial resources to invest in various sectors.

This approach contrasts with related diversification, where a company expands by adding new businesses that produce similar or complementary products, thereby relying on its existing market knowledge and capabilities. The other choices focus on strategies that either deepen engagement in a single industry or enhance specific competencies, which do not align with the definition of unrelated diversification.