Competitive and Managerial Resource Fits: A diversified company’s strategy must aim at producing a good fit between its resource capability and the competitive and managerial requirements of its businesses. Diversification is more likely to enhance shareholder value when the company has or can develop strong competitive and managerial requirements of its businesses. A mismatch between the company’s resource strengths and the key success factors in a particular business can be serious enough to warrant divesting an existing business or not acquiring a new business. A diversified company can fail the resource fit test by not having sufficient resource depth to support all of its businesses. A diversified company has to guard against stretching its resource base too thin and trying to do too many things.

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CORE CONCEPT: A close match between industry key success factors and company resources and capabilities is a solid sign of good resource fit.

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