Documente Academic
Documente Profesional
Documente Cultură
CORPORATE STRATEGY:
Diversification and the Multibusiness Company
Student Version
Copyright 2012 The McGraw-Hill Companies, Inc.
McGraw-Hill/Irwin
Step 1
Step 2
Step 3
Step 4
82
The industry
attractiveness
test
The cost-of-entry
test
The better-off
test
83
Evaluating the
Potential for
Synergy
through
Diversification
No
Synergy
(1+1=2)
Synergy
(1+1=3)
84
Diversifying into
New Businesses
Acquisition
Internal new
venture (start-up)
Joint venture
85
Cost of acquisition
is higher than
internal entry
Factors Favoring
Internal Development
No head-to-head
competition in
targeted industry
Low resistance
of incumbent
firms to market
entry
Added capacity
will not affect
supply and
demand balance
86
87
The Question of
Entry Barriers
The Question of
Speed
The Question of
Comparative Cost
88
Which Diversification
Path to Pursue?
Related
Businesses
Unrelated
Businesses
Both Related
and Unrelated
Businesses
89
ManufacturingRelated Activities
Potential
Cross-Business Fits
Sales and
Marketing
Activities
DistributionRelated Activities
Customer
Service Activities
810
Transferring
specialized and
generalized skills
and\or knowledge
Combining
related value
chain activities
to achieve
lower costs
Leveraging
brand names
and other
differentiation
resources
Using crossbusiness
collaboration
and knowledge
sharing
811
Builds more
shareholder value
than owning a
stock portfolio
Is only possible
via a strategy
of related
diversification
Yields value in
the application
of specialized
resources and
capabilities
Requires that
management
take internal
actions to
realize them
812
Is it is in an industry with
attractive profit and growth
potentials?
Is it is big enough to contribute
significantly to the parent firms
bottom line?
813
Astute Corporate
Parenting by
Management
Cross-Business
Allocation of
Financial
Resources
Acquiring and
Restructuring
Undervalued
Companies
814
815
Demanding
Managerial
Requirements
Monitoring and
maintaining
the parenting
advantage
Pursuing an
Unrelated
Diversification
Strategy
Limited
Competitive
Advantage
Potential
Potential lack of
cross-business
strategic-fit
benefits
816
Seeking
reduction of
business
investment risk
Pursuing rapid
or continuous
growth for its
own sake
Seeking
stabilization to
avoid cyclical
swings in
businesses
Pursuing
personal
managerial
motives
817
COMBINATION RELATED-UNRELATED
DIVERSIFICATION STRATEGIES
Related-Unrelated Business
Portfolio Combinations
DominantBusiness
Enterprises
Narrowly
Diversified
Firms
Broadly
Diversified
Firms
Multibusiness
Enterprises
818
Strength of
Business Units
Cross-business
strategic fit
Diversified
Strategy
Fit of firms
resources
Allocation of
resources
New Strategic
Moves
819
820
821
Success sequence:
822
Sales growth
Profit growth
Cash flow
823
Stick with
the Existing
Business
Lineup
Broaden the
Diversification
Base with New
Acquisitions
Divest and
Retrench to
a Narrower
Diversification
Base
Restructure
through
Divestitures
and
Acquisitions
824