Cross-Business Strategic Fits Along the Value Chain


1.   Cross-business strategic fits can exist anywhere along the value chain – in R&D and technology activities, in supply chain activities and relationships with suppliers, in manufacturing, in sales and marketing, in distribution activities, or in administrative support activities.


2.   Strategic Fits in R&D and Technology Activities: Diversifying into businesses where there is potential for sharing common technology, exploiting the full range of business opportunities associated with a particular technology and its derivatives, or transferring technological know-how from one business to another has considerable appeal.

3.   Strategic Fits in Supply Chain Activities: Businesses that have supply chain strategic fits can perform better together because of the potential for skills transfer in procuring materials, greater bargaining power in negotiating with common suppliers, the benefits of added collaboration with common supply chain partners, and/or added leverage with shippers in securing volume discounts on incoming parts and components.

4.   Manufacturing-Related Strategic Fits: Cross-business strategic fits in manufacturing-re­lated activities can represent an important source of competitive advantage in situations where a diversifier’s expertise in quality manufacture and cost-efficient production methods can be transferred to another business.

5.   Distribution-Related Strategic Fits: Businesses with closely related distribution activities can perform better together than apart because of potential cost savings in sharing the same distribution facilities or using many of the same wholesale distributors and retail dealers to access customers.

6.   Strategic Fits in Sales and Marketing: Various cost-saving opportunities spring from diversifying into businesses with closely related sales and marketing activities. Opportunities include:

a.   Sales costs can be reduced by using a single sales force for the products of both businesses rather than having separate sales forces for each business

b.   After-sale service and repair organizations for the products of closely related businesses can often be consolidated into a single operation

c.   There may be competitively valuable opportunities to transfer selling, merchandising, advertising, and product differentiation skills from one business to another

d.   When a company’s brand name and reputation in one business is transferable to other businesses

7.   Strategic Fits in Managerial and Administrative Support Activities: Often, different businesses require comparable types of skills, competencies, and managerial know-how, thereby allowing know-how in one line of business to be transferred to another. Likewise, different businesses sometimes use the same sorts of administrative support facilities.


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