When to Diversify


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1.   Companies that concentrate on a single business can achieve enviable success over many decades.

2.   Concentrating on a single line of business has important advantages:

a.   Entails less ambiguity

b.   Devotion of the full force of its resources to improving competitiveness

c.   Expanding into geographic markets it does not currently serve

d.   Responding to changing market conditions and evolving customer preference

3.   The big risk of a single business company is having all of the firm’s eggs in one basket.

4.   When there are substantial risks that a single business company’s market may dry up or when opportunities to grow revenues and earnings in the company’s mainstay business begin to peter out, mangers usually have to make diversifying into other businesses a top consideration.


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