Seventh Entry : Diversification and the Multibusiness Company

What Does Crafting A Diversification Strategy Entail??

·         Picking new industries to enter and deciding on the means of entry.

·         Pursuing opportunities to leverage cross-business value chain relationships and strategic fit into competitive advantage.

·         Establishing investment priorities and steering corporate resources into the most attractive business units.

·         Initiating actions to boost the combined performance of the cooperation’s collection of businesses.

Diversification by Acquisition of an Existing Business.

 Advantagesà

·         Quick entry into an industry.

·         Barriers to entry avoided.

·         Access to complementary resources & capabilities

Disadvantagesà

·         Underestimating costs for integrating acquired firm.

·         Overestimating the acquisition’s potential to deliver added shareholder value.

·         Cost of acquisition whether to pay a premium for a successful firm or…..

Entering A New Line Of Business Through Internal Development.

Advantagesà

·         Avoid pitfalls and uncertain costs of acquisition.

·         Allow entry into a new or emerging industry where there a no available acquisition candidates.

Disadvantagesà

·         Must overcome industry entry barriers.

·         Requires extensive investments in developing production & competitive capabilities.

·         May fail due to internal organizational.