Diversification via unrelated business acquisition

Steps:

• Identify the core action: An airline acquiring an unrelated online clothing company.
• Recall business strategy: Acquisitions of dissimilar firms aim to spread risk across industries.
• Evaluate options: Match advantages to diversification benefits, not operational synergies.
• Select best fit: Diversification directly reduces dependency on airline volatility.

Why A is correct:

• Diversification spreads business risk by entering unrelated sectors, per portfolio theory, protecting against industry-specific downturns like fuel price spikes for airlines.

Why the others are wrong:

• B: Economies of scale require similar operations for cost efficiencies, not unrelated clothing sales.
• C: Communication lines improve within integrated supply chains, irrelevant to airline-clothing merger.
• D: Market share increases in the same industry, but clothing expands into a new market.

Final answer: A