Diversification Strategy
STRATEGY & TRANSFORMATION
FINAL ESSAY
Topic: When A Company Likely To Choose Related Diversification and When Is It Likely To Choose Unrelated Diversification?
Introduction
First of all, “corporate strategy is what makes the corporate whole add up to more than the sum of its business unit parts” (Porter, M. E., 1987 cited in Mintzberg et al 2003, p.451). In this regard, corporate-level strategy is concerned with two related issues; “first one is what businesses a corporation should compete in and secondly how can these businesses be managed to create synergy?”(Dess, Lumpkin and Eisner, 2008, p.191). As understood from above issues, these questions are key determinants of how to generate value by entering new markets, launching new products, or developing new techniques and technologies. At the heart of these two issues, diversification has been popular strategic choice in consideration and experimented by many prominent firms (TATA, P&G, Samsung, Virgin Group, Philip Morris, GE, EMI etc.). But unfortunately not all the attempts of diversification has been successful in creating expected returns for shareholders who are technically main reasons to run businesses to create wealth or return more value for their investments. Therefore, corporate level strategies have utmost importance for managers as challenge in strategic decisions and moves. Onwards, this essay will discuss diversification strategy and its types from different aspects of corporate preferences such as why some companies may hold on to specifically one type of diversification (i.e. related diversification) while some others choose the other one, their strategies, expectations, furthermore implications, benefits and drawbacks of such a corporate strategy, then the paper will continue with evaluation of relevant case studies to appraise the mentioned strategy in practice within the context of real business world examples and finally conclusion/recommendation will terminate this writing.
FINAL ESSAY
Topic: When A Company Likely To Choose Related Diversification and When Is It Likely To Choose Unrelated Diversification?
Introduction
First of all, “corporate strategy is what makes the corporate whole add up to more than the sum of its business unit parts” (Porter, M. E., 1987 cited in Mintzberg et al 2003, p.451). In this regard, corporate-level strategy is concerned with two related issues; “first one is what businesses a corporation should compete in and secondly how can these businesses be managed to create synergy?”(Dess, Lumpkin and Eisner, 2008, p.191). As understood from above issues, these questions are key determinants of how to generate value by entering new markets, launching new products, or developing new techniques and technologies. At the heart of these two issues, diversification has been popular strategic choice in consideration and experimented by many prominent firms (TATA, P&G, Samsung, Virgin Group, Philip Morris, GE, EMI etc.). But unfortunately not all the attempts of diversification has been successful in creating expected returns for shareholders who are technically main reasons to run businesses to create wealth or return more value for their investments. Therefore, corporate level strategies have utmost importance for managers as challenge in strategic decisions and moves. Onwards, this essay will discuss diversification strategy and its types from different aspects of corporate preferences such as why some companies may hold on to specifically one type of diversification (i.e. related diversification) while some others choose the other one, their strategies, expectations, furthermore implications, benefits and drawbacks of such a corporate strategy, then the paper will continue with evaluation of relevant case studies to appraise the mentioned strategy in practice within the context of real business world examples and finally conclusion/recommendation will terminate this writing.
References: Besanko, D., Dranove, D., Shanley, M., and Schaefer, S., (2007) Economics of Strategy 4th Ed. John Wiley &Son, Inc. Dess, G. G., Lumpkin, G.T.,& Eisner, A. B. (2008) Strategic Management Text and Cases 4th Ed. New York: McGraw-Hill Irwin De Wit, B Gary, S., (1998) The Dynamics of Diversification, 16th International System Dynamics Conference 1998 Quebec City Grant, R Irwin, R. D., (1995) Diversification Strategy, Accessed 10 May 2010 via www.csuchico.edu/mgmt/strategy/module7 Johnson, G., Scholes, K Johnson, G., Scholes, K. and Whittington, R. (2009) Fundamentals of Strategy Financial Times Prentice Hall McGee, J., Thomas, H Mintzberg, H., Lampel, J., Quinn, J. B., & Ghoshal, S. (2003) The Strategy Process Concepts Contexts Cases Global 4th Ed. New Jersey: Pearson Education, Inc. Prahalad, C. K., and Bettis, R. (1986) The Dominant Logic: A New Link Between Diversity and Performance, Strategic Management Journal, vol. 6 Teece DJ