The Korean company's actions reflected unrelated diversification.
Unrelated diversification refers to a situation where a company expands by acquiring a company in another sector or industry.
Unrelated diversification is done to:
- improve fortunes the acquiring company's industry is on the decline
- increase shareholder wealth
- for financial gain
There are other reasons as well but one of the reasons mentioned, supports why the Korean smartphone company did what it did. By acquiring a company outside its industry, it is protected if its industry leads to it incurring losses.
In conclusion, the Korean company engaged in unrelated diversification by buying a medium size airline company.
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