Chapter 06

Chapter 06 - strategy • Efficiency gains • Quality...

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6–1 Knowledge Objectives Corporate Strategy Issues: What businesses should the corporation be in? How should resources be allocated among the business units? What geographic markets should the corporation be in? How should the corporation enter new lines of business? Why do managers like diversification?
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6–2 Levels and Types of Diversification SOURCE: Adapted from R. P. Rumelt, 1974, Strategy, Structure and Economic Performance, Boston: Harvard Business School. Figure 6.1 Figure 6.1
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6–3 Why do firms implement related  diversification strategies? To gain economies of scope By sharing activities (operational relatedness) By transferring competencies (corporate relatedness) To gain market power By blocking competitors through multipoint competition By vertical integration
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6–4 Why do firms follow a vertical integration 
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Unformatted text preview: strategy? • Efficiency gains • Quality control • Protection of basis for competitive advantage 6–5 What are the costs of related diversification? • Coordination costs • Bureaucratic costs 6–6 Why do Firms Pursue Unrelated Diversification Strategies? • Financial economies Cost savings that are realized through improved allocation of financial resources Create value through two types of financial economies: Efficient internal capital allocations Purchasing other companies and restructuring their assets However…. .high bureaucratic costs 6–7 Diversification vs. Performance Figure 6.3 Figure 6.3 6–8 Why do managers like diversification? • Managerial risk reduction • Desire for increased compensation...
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Chapter 06 - strategy • Efficiency gains • Quality...

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