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Companies are often torn between the benefits of focusing on

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by BTGmoderatorDC » Sun Jul 15, 2018 1:11 am

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Companies are often torn between the benefits of focusing on one major product or service and the drawbacks of relying too heavily on one primary source of income. While narrow focus can provide a company with an advantage over competitors that offer a wider range of products or services, an undiversified income stream can leave a company susceptible to major fluctuations in cash flow. We can see this tension realized when, for example, ________________.

(A) a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state
(B) an advertising agency loses one of its clients
(C) a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
(D) a construction company opts to use non-union labor to increase its profits
(E) a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients
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by deloitte247 » Thu Jul 19, 2018 11:16 pm
Option A - INCORRECT
Citing the local messenger as an example here, shows that a narrow business can collapse at any point in time when it cannot meet up with dues to be paid, Example is the Taxes that has caused many local messenger to move out of state but the ones able to withstand the tension are those that have more helping hands to continue with effective delivery even though they still retrench some of their workers so they can pay off taxes and still maintain the business.

Option B - INCORRECT.
An advertising agent losing one of its client can cost the agency to collapse if the client loosed is one of the topmost client that sustain the agency.

Option C - CORRECT.
This option is more detailed on diversity in business chain. Since narrow focus is profitable but can lead to fluctuation of cash flow and also risky when sustaining the market share, then it is advisable to diversify into varieties of business that can provide more funds so the company can generate funds to maintain business that is been threaten by competition and other influences.

Option D - INCORRECT.
This option is still narrow focus on the service provided by the construction company to increase its profit but not diversified in nature.

Option E - INCORRECT.
This option is still cycled on a narrow focus business plan, which means that if there is a threat on the business its still going to affect both the specialty sandwich store and its local franchise.
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