Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 104

A restaurant decided to expand its business to include delivery services, rather than relying on third-party food delivery services. Which of the following best describes the restaurant's strategy?

Answer options

• A. Diversification
• B. Vertical integration
• C. Risk avoidance
• D. Differentiation

Correct answer: A

Explanation

The correct answer is A, Diversification, as the restaurant is expanding its service offerings by including delivery, thereby entering a new market segment. Options B (Vertical integration) relates to controlling supply chains, C (Risk avoidance) involves strategies to mitigate potential losses, and D (Differentiation) focuses on distinguishing products or services, none of which accurately describe the restaurant's strategy of adding delivery services.