Which of the following is a disadvantage of conglomerate integration?

• A. One business may take on another in a market they know nothing about, causing the new business to fail
• B. Having too many products in different markets can cause the business to lose focus on core activities
• C. The business may become too large and inefficient to manage
• D. It guarantees higher profits

Answer: (B)

The idea being tested is how diversification into many different, unrelated businesses can affect a company’s focus. When a conglomerate spreads its resources across a wide range of products and markets, management attention and strategic focus get diluted. This loss of focus makes it harder to excel in any one area, leading to inefficiencies, slower decision-making, and weaker performance overall. That’s why having too many products in different markets is the clearest drawback of conglomerate integration.

While expanding into unfamiliar markets carries risk, and becoming very large can bring management challenges, neither defines the core issue as precisely as loss of focus due to broad diversification. And profits aren’t guaranteed simply by diversifying.