Professional Documents
Culture Documents
Diversification:
Chapter Titlefor
Strategies
Managing a
Group of
Businesses
16/e PPT
McGraw-Hill/Irwin
To acquire or not to
acquire: that is the
question.
Robert J. Terry
9-2
Diversification and
Corporate Strategy
A company
Why Diversify?
1+1=3
9-9
9-11
Internal Startup
More
attractive when
9-12
Foreign
9-13
Unrelated Diversification
Involves diversifying into
businesses with no
competitively valuable
value chain match-ups or
strategic fits with firms
present business(es)
Horizontal/Vertical
Integration
9-15
9-16
9-17
Examples:
Wal-mart
EXHIBIT 8.8
Pepsi
BoA
Salesforce.com
Merrill Lynch
819
9-21
Skills transfer
Lower costs
Common brand name usage
Stronger competitive capabilities
Spread
Supply
chain activities
Manufacturing
Sales
activities
Distribution
activities
Managerial
9-23
Potential
benefits
Cost-savings in technology
development and new product R&D
9-24
Procuring materials
9-25
Manufacturing Fits
Potential
Quality manufacture
Cost-efficient production methods
Cost-saving
9-26
Distribution Fits
Offer
9-27
in sales costs
Similar
Managerial and
Administrative Support Fits
Emerge
Entrepreneurial know-how
Administrative know-how
Operating know-how
Different
9-29
EXHIBIT 8.4
830
EXHIBIT 8.5
831
832
Reducing quality
Single captured customer can slow experience effects
Reducing flexibility
Slow to respond to changes in technology or demand
833
for supplies
OR
Forward integrated but also relies on outside market firms
Strategic outsourcing
Moving value chain activities outside the firm's boundaries
Related Diversification
and Competitive Advantage
Competitive
Transfer expertise/capabilities/technology
from one business to another
Reduce costs by combining related
activities of different businesses into
a single operation
Transfer use of firms brand name reputation
from one business to another
Create valuable competitive capabilities via crossbusiness collaboration in performing related value chain
activities
9-36