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The relationship between diversification and firm performance
Unrelated diversification is generally associated with lower performance
Diversification discount
the value of the combined business is lower than the sum of its parts
沒有綜效
Good performance is associated with firms that undertake related diversification
How can companies create value through diversification?
1. Vertical integration 垂直整合
May enter related businesses to increase their market power by reducing competition from related products
2. complementarities between businesses 協同效應(互補吧?)
so-called economies of scope
firms can scale common resources that can be used in multiple businesses
Now resource allocation needs to be about much more specialized resources that are unique to the firm
firms can develop slack resources in one business and redeploy these resources to other businesses.
Managers may also sometimes diversify to
reduce risk
or
grow the size
of the firm
Reduce manager's risks rather than those of shareholders(BAD><)
Competitive organizational analysis
typically some market type arrangement and
alliance
,
long-term contract
,
licensing
, etc
Diversification can be approached in several ways
Globalization
is a form of diversification
Especially for cyclical markets that have some tie to weather patterns
It can be seen as an alternative to other organizational strategies
Delve into the pros and cons of organizing within a firm
1 more item...
All in al, the core motivations for diversification that are generally accepted to create value for the company are the ones related to resource and capability-based synergies between businesses
Different from
Organic