Business Diversification Concepts

A company expands into businesses that share similar core competencies, resources, or activities. This creates synergies and increases efficiency by leveraging existing strengths.

The skills, knowledge, and abilities that a company possesses and that are essential to its competitive advantage. These competencies can be applied across different businesses to create value.

Sharing core competencies across different businesses within a company. This can lead to cost savings, efficiency improvements, and enhanced market power.

A company's ability to share activities across its business units. This can involve sharing tangible resources like production facilities or intangible resources like marketing expertise.

A strategy where a company expands into businesses along its value chain, either upstream or downstream. This can involve acquiring suppliers or distributors.

A type of diversification where a company expands into businesses that are unrelated to its existing core competencies. This can create value by leveraging support activities or creating economies of scale.

The central organizational unit that manages a diversified corporation. It can add value by allocating resources, monitoring performance, and providing strategic guidance.

A company's ability to achieve greater output and efficiency by increasing its production scale. This can be achieved by sharing resources, reducing fixed costs, and leveraging bargaining power.

The process of selling off assets that are not generating profits.

Adjusting the mix of debt and equity financing used by a company.

Making changes to the top management team, organizational structure, and reporting relationships within a company.

A portfolio management technique that involves evaluating businesses within a company based on their market share and growth rate.

The reduction of risk through diversification.

The process of combining businesses to create a larger, more diverse entity.

The process of developing new businesses internally, through innovation and entrepreneurship.

The ability of a company to gain greater bargaining power with suppliers and customers by combining resources, assets, or operations. This leads to a more dominant market presence.

A model that categorizes businesses based on their market share and market growth rate. Businesses with high market share and high growth rate are considered 'stars,' while those with low market share and low growth rate are 'dogs.'

The role of a corporate office in creating value by providing expertise, central functions, and restructuring initiatives to individual business units. It focuses on strategically managing and improving the performance of these units.

The costs associated with engaging in market transactions. It involves searching for suppliers, negotiating contracts, monitoring performance, and enforcing agreements.

A vertical integration strategy where a company acquires or develops upstream businesses, effectively becoming its own supplier. It aims to control the source of raw materials or components.

A vertical integration strategy where a company acquires or develops downstream businesses, effectively becoming its own distributor. It aims to control the distribution and delivery of its products.

A merger involves two companies combining to form a new legal entity, often on relatively equal terms. This option is less frequent compared to acquisitions.

An acquisition occurs when one company buys another, using methods such as stock purchase, cash, or debt issuance. This is a more common strategy compared to mergers.

Acquisitions can be faster than building a new business or developing a new product line. Buying another company provides instant access to resources, customers, and expertise.

Acquisitions benefit companies by allowing them to gain valuable resources, expand their product offerings, and penetrate new market segments.

Mergers and Acquisitions can create synergy, where the combined entity performs better than the sum of its parts. Synergy can be achieved through leveraging core competencies, sharing activities, and building market power.

Divestment happens when a company sells off a part of its business. It can be used to focus on core businesses, free resources, raise cash, or address issues like failed acquisitions.

Successful divestiture involves removing emotions, understanding the value of the business being sold, timing the deal correctly, finding a suitable buyer, creating a compelling story about the business, running divestitures systematically, and communicating effectively.

Strategic alliances and joint ventures involve partnerships between two or more companies to achieve specific goals. It's a way to share resources, enter new markets, or gain access to new expertise.

A tool used by businesses to analyze their product portfolio and prioritize investments based on market share and growth rate. The four quadrants are Stars (high market share, high growth), Cash Cows (high market share, low growth), Question Marks (low market share, high growth), and Dogs (low market share, low growth).

A product with high market share and high growth potential in the BCG Matrix. They require significant investment to maintain growth.

Products with high market share but low growth potential in the BCG Matrix. They generate cash flow for the company and require little investment.

Products with low market share but high growth potential in the BCG Matrix. They require careful evaluation as they may need significant investment to become Stars.

Products with low market share and low growth potential in the BCG Matrix. They may be a drain on company resources and should be considered for divestment.

Partners in a strategic alliance should bring unique strengths that complement each other, creating a synergy that is easily protected and maintained.

Internal development of new ventures allows a company to keep all profits and avoid merging different cultures, but can be time-consuming and require continuous new skill development.

Corporate entrepreneurship involves a company creating new businesses within its existing structure to exploit new opportunities and create value.

Managers motivated by personal gain may prioritize their own interests over shareholder value, leading to actions that don't necessarily create long-term value for the company.

Antitakeover tactics, like greenmail and golden parachutes, are designed to protect a company from hostile takeover, but can raise ethical concerns as they might not act in the best interest of shareholders.

Diversification involves expanding a company's operations into new product lines or markets to create value through shared infrastructure and core competencies.

Sharing infrastructure refers to utilizing existing resources and systems across different parts of a company, reducing costs and improving efficiency.