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Diversification Strategy (Three Reasons to Diversify (:red_flag…

- - - - Level of diversification
        
        Low
        
        Single Business > 95%
        
        Dominant Business 70-95%
        
        High
        
        Related (sharing value chain) :pencil2:
        
        Unrelaed
- - - - Consolidation of suppliers供應商整合
        
        Contract
      - Cross-selling products交叉銷售
        
        Alternatives
        
        Outsourcing
        
        Alliances
  - - - Antitrust Violation
        
        Dominant position
        
        Aggressive ways
    - - Backward (Upstream) and Forward(Downstream) integration
  - - - Capitalize on opportunities in unrelated markets
        
        :star:Shareholders can choose where to invest for themselves.
        
        Reinvest of Retain Earning
      - Capitalize on opportunities in related markets
        
        :star:Little evidence that internal capital markets are more efficient
        
        Privileged information
      - Reduce volatility by diversifying assets
        
        :star:Shareholders can diversify for themselves.
        
        External changes
      - Reduce risk by diversifying assets
        
        :star: Combining units can compound risks across units, raising the costs of volatility and the risk of bankruptcy.
        
        Internal risk (Employment and financial costs )
- - - - Coordinating layers of management in firms
      - Slow, inflexible decision-making
      - Less able to adapt quickly to market changes
- - - - protect market
      - eliminate duplicate costs
      - reduce transaction costs