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【G4】Diversification Strategy (Schema of Diversification (Related…
【G4】Diversification Strategy
Schema of Diversification
Dominant Business
Related Diversification
Related Constrained
Related Link
Signal Business
Unrelated Diversification
Why firms exist?
The theory of the firm
Risks & frictions of using markets (low complexity, low cost)
Bureaucratic & agency costs of using firms (high complexity, low cost)
Ownership (residual rights of control)
Creates incentives & mechanism
Minimizes risks & frictions
Opportunism (the less opportunities you have, the more risks you
would have to face)
The ability to make a decision when uncertainty arise
What limits firm scope?
Transaction Cost vs Complexity of Transaction
Bureaucratic Costs
Coordinating layers of management in firms
Slow, inflexible decision-making
Less able to adapt quickly to market changes
Government
Agency Costs
Organizational politics, influence games
Opportunistic behavior of managers and employees
Monitoring and sanctioning difficult
Why to diversify?
Financial Reasons (A&C)
Capitalize on opportunities in unrelated markets.
Capitalize on opportunities in related markets
Reduce the volatility by diversifying assests
Reduce risk by diversifying assests
Strategic Reasons (A&C)
Eliminate competition by subsidizing a price war
Raise rival's cost
Reducing rivalry through mutual forbearance
Minimizing transaction costs
Operational Reasons
Synerge
Transfer/leverage rent-generating assets
Improving coordination among businesses
Exploit various economies of scale and scope
Caution & alternatives
BCG Marix
Industry Attractiveness
Dog
The Right Degree of Diversification
Goldilocks principle
something must fall within certain margins,
as opposed to reaching extremes.
Operating in different businesses,different size
thinking about diversification to decide the position
Diversification and Performance Relationship
103214070 袁 丹
103212019 張 杰
104212053林仲佑
104212025 吳宛庭
104212050 邱奕明
106212504 游文隆
Business Unit Competitive Advantage
Cash Cow
Star
Question Mark
(Relative market share)
