CORPORATE STRATEGY: DIVERSIFICATION AND THE MULTIBUSINESS COMPANY

CORPORATE STRATEGY: DIVERSIFICATION AND THE MULTIBUSINESS COMPANY

In this topic try to understand when and how business diversification can enhance shareholder value. The business diversification becomes a consideration it happens a firm should expand into businesses whose technologies and products complement its present business. Thus, refer to resources and capabilities can be used as valuable competitive assets in other businesses. Then costs can be reduced by cross-business sharing or transfer of resources and capabilities. It’s also have transferring a strong brand name to the products of other businesses helps drive up sales and profits of those businesses such as the firm already have big and famous name in the community.  

 Then have gain an understanding of how related diversification strategies can produce cross-business strategic fit capable of delivering competitive advantage.

The figure above show the identifying cross-business strategic fits along the value chain. There have related with one of other with supply, manufacturing, distribution, customer, sales and marketing, and R&D technology activities with have a together the business can gain profits more and more. Then it can support corresponding value chain activities across businesses. Diversifying into related businesses where competitively valuable strategic-fit benefits can be captured puts a company’s businesses in position to perform better financially as part of the company than they could have performed as independent enterprises, thus providing a clear avenue for boosting shareholder value and satisfying the better-off test.

Then understand diversified firm’s four main corporate strategy options for solidifying its diversification strategy and
improving company performance. Corporate parenting refers to the role that a diversified corporation plays in nurturing its component businesses through the provision of top management expertise, disciplined control, financial resources, and other types of generalized resources and capabilities such as long-term planning systems, business development skills, management development processes, and incentive systems. A diversified firm has a parenting advantage when it is more able than other firms to boost the combined performance of its individual businesses through high-level guidance, general oversight, and other corporate-level contributions. In other word, an umbrella brand is a corporate brand name that can be applied to a wide assortment of business types. As such, it is a generalized resource that can be leveraged in unrelated diversification.

Crafting new strategic moves to improve overall corporate performance. Restructuring refers to overhauling and streamlining the activities of a business—combining plants with excess capacity, selling off underutilized assets, reducing unnecessary expenses, and otherwise improving the productivity and profitability of the firm.

A spinoff is an independent company created when a corporate parent divests a business by distributing to its stockholders new shares in this business. Companywide restructuring (corporate restructuring) involves making major changes in a diversified company by divesting some businesses and/or acquiring others, so as to put a whole new face on the company’s business lineup.