Chapter 9 - Diversification: Strategies for managing a group of businesses. This chapter includes contents: When to diversify, strategies for entering new businesses, choosing the diversification path: related versus unrelated businesses, the case for diversifying into related businesses, the case for diversifying into unrelated businesses, combination related-unrelated diversification strategies, evaluating the strategy of a diversified company, after a company diversifies: the four main strategy alternatives. | Diversification Strategies for Managing a Group of Businesses 9 Chapter Screen graphics created by: Jana F. Kuzmicki, . Troy State University-Florida and Western Region Chapter Roadmap When to Diversify Strategies for Entering New Businesses Choosing the Diversification Path: Related versus Unrelated Businesses The Case for Diversifying into Related Businesses The Case for Diversifying into Unrelated Businesses Combination Related-Unrelated Diversification Strategies Evaluating the Strategy of a Diversified Company After a Company Diversifies: The Four Main Strategy Alternatives 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 for several different businesses competing in diverse industry environments When Should a Firm Diversify? It is faced with diminishing growth prospects in present business It has opportunities to expand into 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 Why Diversify? To build shareholder value! Diversification is capable of building shareholder value if it passes three tests: Industry Attractiveness Test—the industry presents good long-term profit opportunities Cost of Entry Test—the cost of entering is not so high as to spoil the profit opportunities Better-Off Test—the company’s different businesses should perform better together than as . | Diversification Strategies for Managing a Group of Businesses 9 Chapter Screen graphics created by: Jana F. Kuzmicki, . Troy State University-Florida and Western Region Chapter Roadmap When to Diversify Strategies for Entering New Businesses Choosing the Diversification Path: Related versus Unrelated Businesses The Case for Diversifying into Related Businesses The Case for Diversifying into Unrelated Businesses Combination Related-Unrelated Diversification Strategies Evaluating the Strategy of a Diversified Company After a Company Diversifies: The Four Main Strategy Alternatives 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 for several .
