Diversification: Strategic Management
Chapter 8: Diversification:
Strategies for Managing a Group of Businesses
Diversification and Corporate Strategy
A company is diversified when it is in two
or more lines of business that operate in diverse market environments
Strategy-making in a diversified
company is a bigger picture exercise than crafting a strategy for a single line-of-business
A diversified company needs a multi-industry, multi-business strategy
A strategic action plan must be developed
Screen graphics created by: Jana F. Kuzmicki, Ph.D. Troy University
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
for several different businesses competing in diverse industry environments
8-4
Chapter Learning Objectives
1. Understand when and how business 2. diversification can enhance shareholder value. Gain an understanding of how related diversification strategies can produce crossbusiness strategic fits capable of delivering competitive advantage. Become aware of the merits and risks of corporate strategies keyed to unrelated diversification. Gain command of the analytical tools for evaluating a company’s diversification strategy. Become familiar with a company’s five main corporate strategy options after it has diversified.
8-2
When Should a Firm Diversify?
It is faced with diminishing growth
prospects in present business
It has opportunities to expand into
3.
4. 5.
industries whose technologies and products complement its present business It can leverage existing competencies and capabilities by expanding into businesses where these resource strengths are key success factors It can reduce costs by diversifying into closely related businesses It has a powerful brand name it can transfer to products of other businesses to increase sales and profits of these businesses
8-5
Chapter Roadmap
When to Diversify Building Shareholder Value: The Ultimate
Why Diversify?
To build shareholder
Strategies for Managing a Group of Businesses
Diversification and Corporate Strategy
A company is diversified when it is in two
or more lines of business that operate in diverse market environments
Strategy-making in a diversified
company is a bigger picture exercise than crafting a strategy for a single line-of-business
A diversified company needs a multi-industry, multi-business strategy
A strategic action plan must be developed
Screen graphics created by: Jana F. Kuzmicki, Ph.D. Troy University
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
for several different businesses competing in diverse industry environments
8-4
Chapter Learning Objectives
1. Understand when and how business 2. diversification can enhance shareholder value. Gain an understanding of how related diversification strategies can produce crossbusiness strategic fits capable of delivering competitive advantage. Become aware of the merits and risks of corporate strategies keyed to unrelated diversification. Gain command of the analytical tools for evaluating a company’s diversification strategy. Become familiar with a company’s five main corporate strategy options after it has diversified.
8-2
When Should a Firm Diversify?
It is faced with diminishing growth
prospects in present business
It has opportunities to expand into
3.
4. 5.
industries whose technologies and products complement its present business It can leverage existing competencies and capabilities by expanding into businesses where these resource strengths are key success factors It can reduce costs by diversifying into closely related businesses It has a powerful brand name it can transfer to products of other businesses to increase sales and profits of these businesses
8-5
Chapter Roadmap
When to Diversify Building Shareholder Value: The Ultimate
Why Diversify?
To build shareholder