Today we will continue with our learning session in Strategic Management under the topic of Corporate Strategy Diversification and the Multibusiness Company. This topic is discussing on how understand how and when business diversification can enhance shareholder value.Besides that,this objective is to gain an understanding of how related diversification strategies can produce cross-business strategic fit capable of delivering competite advantage.
Make winners out of every business in your company.Don’t carry losers.
Jack Welch – Former CEO,General Electric
The task of crafting a diversified company’s overall corporate strategy falls squarely in the lap of top-level executives and involves four distinct facets.
1. Picking new industries to enter and deciding on the means of entry
2. Pursuing opportunities to leverage cross-business value chain relationships and strategic fit into competitive advantage.
3. Establishing investment priorities and steering corporate resources into the most attractive business units.
4. Initiating actions to boots the combined performance of the performance of the corporations collection of business.
Three strategy alternatives for pursuing diversification
1. Evaluating industry attractiveness
2. Evaluating business0 – unit competitive streght
3. Determining the competitive value of strategic fit in diversified companies
The purpose of diversification is to build shareholder value.Diversification builds shareholder calue when a diversified group of business can perform better under the auspices of single corporate parents.1+1 = 2 is greater but 1+1=3 is more performance benefits.