Chapter Nine - Chapter Nine Corporate Diversification...

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Corporate Diversification Strategies Single business concentration 1. Concentrating on a single-business concentration offers the advantage of Less ambiguity; Energies in one direction: full force of resources for core competency; strengthening firm position in geographic markets; Long term competitive position; Problem: All eggs in one basket. Elements of Corporate Strategy 2. The task of crafting corporate strategy for a diversified company includes Deciding when and how to enter new businesses. Choosing what actions to take to boost the combined performance of the businesses the firm has diversified into. Finding ways to capture the synergy among related business units and turn it into competitive advantage. Establishing investment priorities and steering corporate resources into the most attractive business units. When to Diversify 3. Diversification generally doesn’t need to become a strategic priority until a company a. Begins to run out of growth opportunities in its mainstay business. b. Tries to avoid putting all of its "eggs" in one industry basket. c. Has competencies and capabilities that are readily transferable to other business. Diversification: Building shareholder Value 4. The overriding purpose of diversification is to a. Avoid risk by spreading financial investments over a greater number of businesses. b. Find productive uses for excess cash and surplus or underemployed resources. c. Seek out new kinds of strategic fit opportunities. d. Escape declining or unattractive industries. e. Build shareholder value. 5. Businesses may be able to perform better under common management than they can as stand-alone enterprises when there are opportunities a. To share use of a common brand name. b. To transfer competitively valuable skills or technology from one business to another. c. To leverage existing competencies or capacities or to create valuable new competencies or capacities. d. To share technology or facilities or functional activities across business and thereby reduce costs. e. All of these. Three Tests for Overriding Purpose of Diversification
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Chapter Nine - Chapter Nine Corporate Diversification...

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