Strategies to Broaden a Diversified Company’s Business Base

1.   Diversified companies sometimes find it desirable to build positions in new industries, whether related or unrelated.

2.   There are several motivating factors:

a.   Sluggish growth that makes the potential revenue and profit boost of a newly acquired business look attractive

b.   Vulnerability to seasonal or recessionary influences or to threats from emerging new technologies

c.   The potential for transferring resources and capabilities to other related or complementary businesses

d.   Rapidly changing conditions in one or more of a company’s core businesses brought on by technological, legislative, or new product innovations that alter buyer requirements and preferences

e.   To complement and strengthen the market position and competitive capabilities of one or more of its present businesses

3.   Usually, expansion into new businesses is undertaken by acquiring companies already in the target industry.

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