CHAPTER 8 : CORPORATE STRATEGY: DIVERSIFICATION AND THE MULTIBUSINESS COMPANY.

What is Diversification?

A collection of businesses under one corporate umbrella.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.

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

Five Components of Corporate Strategy

Vision- For the corporation as a whole

Goals and Objectives

Structure, systems and procedures

     #Deploy corporate resources into the businesses

     #Establish the context for decentralized decision making

     #Routine public company functions

    #Contain multiple elements e.g. structure, budgeting,strategic planning, management style etc.

Five Components of Corporate Strategy-Resources

      1)Set of tangible and intangible assets, established over time, which can’t be readily imitated, acquired or duplicated.

      2)Make the corporation unique

      3)When they are competitively superior and they contribute to sustainable competitive advantage in the SBU’s, they become a corporate advantage.

      4)Resources, effectively used, create value

       -One time=restructuring

       -Ongoing=use of corporate brand

       5)Industries in which the corporation chooses to compete

       6)Competitive strategies adopted by the business units in those industries.

       -How the units are related to each other.