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  • What Is Diversification?: A Collection of Businesses Under One Corporate Umbrella

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    Dimple Pankaj Desai
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    Diversification refers to a company operating in multiple lines of business under one corporate umbrella. A diversified company needs a strategy that addresses its various businesses across different industries. In addition to developing strategic plans for each business unit, a diversified company must create an overarching corporate strategy that generates value and ensures internal consistency. A company should diversify only when its core business lacks growth opportunities or when diversification will lead to value creation, not before having fully exploited its main business. The current trend favors narrower diversification focused on building strong positions in a select few industries rather than spreading investments too widely.

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    Diversification refers to a company operating in multiple lines of business under one corporate umbrella. A diversified company needs a strategy that addresses its various businesses across different industries. In addition to developing strategic plans for each business unit, a diversified company must create an overarching corporate strategy that generates value and ensures internal consistency. A company should diversify only when its core business lacks growth opportunities or when diversification will lead to value creation, not before having fully exploited its main business. The current trend favors narrower diversification focused on building strong positions in a select few industries rather than spreading investments too widely.

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    14 views5 pages

    What Is Diversification?: A Collection of Businesses Under One Corporate Umbrella

    Uploaded by

    Dimple Pankaj Desai
    Diversification refers to a company operating in multiple lines of business under one corporate umbrella. A diversified company needs a strategy that addresses its various businesses across different industries. In addition to developing strategic plans for each business unit, a diversified company must create an overarching corporate strategy that generates value and ensures internal consistency. A company should diversify only when its core business lacks growth opportunities or when diversification will lead to value creation, not before having fully exploited its main business. The current trend favors narrower diversification focused on building strong positions in a select few industries rather than spreading investments too widely.

    Copyright:

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    What is Diversification?

    A collection of businesses under one corporate umbrella

    Diversification and Corporate Strategy


    A company is diversified when it is in two or

    more lines of business

    Strategy-making in a diversified company is a bigger picture exercise than crafting a strategy for a single line-of-business
    A diversified company needs a multi-industry, multi-

    business strategy

    A strategic action plan must be developed for several different businesses competing in diverse industry environments

    Diversification and Corporate Strategy


    In addition to a business strategy which identifies and maintains a sustainable competitive advantage in each of the business units, a coherent corporate strategy is needed which creates value and is internally consistent.

    When do we diversify?
    When a company runs out of growth opportunities in the core business and not before! When diversification results in creation of value

    COMMENT: TREND IN DIVERSIFICATION


    The present trend toward narrower diversification has been driven by a growing preference to gear diversification around creating strong competitive positions in a few, wellselected industries as opposed to scattering corporate investments across many industries!

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