CHAPTER 8

Corporate Strategy:
Diversification and
Multibusiness Company
 Diversification
a growth and development strategy
of your business by exploring new
possibilities
Multibusiness
Company
a large corporate enterprise with
interests in two or more separate
industries which associate with each
other
 COMPARISON

Type of company
that has multiple
unrelated One-business
business or Managers come up with a plan
products Company
for competing only a single
industry environment (business
strategy)

A company
Diversified Strategy making involves engaged &
operates a
Company assessing multiple industry business
environment & developing a enterpirse
set of business strategies that produces
(corporate strategy) one product.
 Four Distinct Facets of Corporate Strategy

Picking new industries Establishing investment

to enter and deciding priorities and steering
on the means of entry 01 03
Title corporate resources into the
most attractive business units

Pursuing opportunities Initiating actions to boost

to leverage cross-
02
Title 04
Title
the combined performance
business value chain of the corporation’s
relationshiip into collection of businesses
competitive advantage
 LO1 - Understand when and how diversifying into
LEARNING OBJECTIVES
multiple businesses can enhance shareholder value
LO2 - Gain an understanding of how related
diversification strategies can produce cross-business
strategic fit capable of delivering competitive
advantage
LO3 - Become aware of the merits and risks of
corporate strategies keyed to unrelated
diversification
LO4 - Gain command of the analytical tools for
evaluating a company’s diversification strategy
LO5 - Understand a diversity company’s four main
corporate strategy options for solidiying its strategy
and improving company performances
 LO1 - Understand when and how diversifying into multiple
businesses can enhance shareholder value

WHEN?
A business is ready to bring more
revenue and wants to reduce the amount
of risk it has in the market

HOW?
When the results of dversification
increases the value of the shareholder
recieves as dividends and stock price
appreciaition
BUSINESS DIVERSIFICATION
TESTS
03
02 Better - Off
Test
Cost - Entry
01 Test
Industry
Attractiiveness
Test
Add
your
words
here
APPROACHES TO DIVERSIFYING THE BUSINESS LINE UP

Acquisition
An acquisition is when one company
purchases most or all of another company's
shares to gain control of that company.
Purchasing more than 50% of a target firm's
stock and other assets allows the acquirer to
make decisions about the newly acquired
assets without the approval of the company’s
other shareholders
APPROACHES TO DIVERSIFYING THE BUSINESS LINE UP

Internal
Development
Internal development refers to growth
that happens when an organisation or
company uses its own resources to grow the
company. The main aim of internal
development is to boost sales, increase
efficiency, handle customers better and
generally help in expanding the company.
 APPROACHES TO DIVERSIFYING THE BUSINESS LINE UP

Joint Ventures w/
A joint venture (JV) is a business
other Companies
arrangement in which two or more parties
agree to pool their resources for the purpose
of accomplishing a specific task. This task can
be a new project or any other business
activity.In a JV, each of the participants is
responsible for profits, losses, and costs
associated with it. However, the venture is its
own entity, separate from the participants'
other business interests.
Thank you