Professional Documents
Culture Documents
CHAPTER 6
Single Business
More than 95% of revenue
comes from a single business. A
Dominant Business
Between 70% and 95% of
revenue comes from a single
business. A
B
2007 Thomson/South-Western. All rights reserved. 64
Levels of Diversification: Moderate to High
Related Constrained Related Linked (mixed
Less than 70% of revenue related and unrelated)
comes from a single Less than 70% of revenue
business and all comes from the dominant
businesses share business, and there are only
product, technological limited links between
and distribution linkages. businesses.
A A
B C B C
2007 Thomson/South-Western. All rights reserved. 65
Levels of Diversification: Very High Levels
Unrelated Diversification
Less than 70% of revenue comes from the dominant
business, and there are no common links between
businesses.
B C
High
Related Constrained Both Operational and
Diversification Corporate Relatedness
Vertical Integration (Rare capability that creates
Operational diseconomies of scope)
(Market Power)
Relatedness:
Sharing
Activities
between Unrelated Related Linked
Businesses Diversification Diversification
(Financial Economies) (Economies of Scope)
Low
High Low
Corporate Relatedness: Transferring Skills into
Businesses through Corporate Headquarters
Multipoint Competition
Two or more diversified firms simultaneously compete
in the same product areas or geographic markets.
Vertical Integration
Backward integrationa firm produces its own inputs.
Forward integrationa firm operates its own
distribution system for delivering its outputs.