Limitations of Diversification
(I) Huge funds are required for diversification. The internal savings of the business may not be sufficient to finance growth.
(ii) The functions and responsibilities of top executives increase because of need to handle new product, technology and markets. They may find problems in coordination, which may lead to inefficient operations.
(iii) Diversification may involve new technology and new markets and the present staff may face problems in adjusting to this growth pattern.
(iv) Diversification may lead to unknown products and markets leading to more risk.
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