Corporate Diversification

Corporate Diversification - CORPORATE-LEVEL STRATEGY:...

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Unformatted text preview: CORPORATE-LEVEL STRATEGY: RELATED AND UNRELATED DI VERSI FI CATI ON Corporate Strategy • What are the concerns of corporate strategy according to Porter? • What businesses should we be in? • How should the corporate office manage its array of business units? What enables a firm to diversify? Free Cash Flow – Allows Diversification “...cash in excess of that required to fund investments in the company’s existing industry...” What else can be done with fr ee cash flow?? Why Diversify – what are the advantages? Advantages • Share resources/competencies • Tighten ownership of the value chain • Enhance market share • Limit competition What are the Disadvantages of Diversification? Disadvantages/Limits of Diversification • Changes in I ndustry/Company • Diversification for the Wrong Reasons • Bureaucratic Costs of Diversification • Competition occurs at the BU level • Shareholders can diversify themselves • Business cycles still affect most firms Difference between Related & Unrelated Diversification? Types of Diversification • Related - entry into new business in different industry: Related to company’s existing business/activities Has commonalities between one or more components of each activity’s value chain • Unrelated - entry into industries with no...
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This note was uploaded on 06/07/2011 for the course BMGT 892 taught by Professor Donsmith during the Spring '11 term at UNL.

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Corporate Diversification - CORPORATE-LEVEL STRATEGY:...

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