1. Once the decision is made to pursue diversification, the firm must choose whether to diversify into related businesses, unrelated businesses, or some mix of both. Businesses are said to be related when their value chains possess competitively valuable cross-business value chain matchups or strategic fits. Businesses are said to be unrelated when the activities comprising their respective value chains are so dissimilar that no competitively valuable cross-business relationships are present.
CORE CONCEPT: Related businesses possess competitively valuable cross-business value chain matchups; unrelated businesses have very dissimilar value chains, containing no competitively useful cross-business relationships.
2. Most companies favor related diversification strategies because of the performance-enhancing potential of cross-business synergies.
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