Chapter 8. Diversification Strategies for Managing a Group of Businesses 2004034069 김현정 2008034183 최호선

Contents STRATEGIES FOR ENTERING NEW BUSINESSES 1 STRATEGIES FOR ENTERING NEW BUSINESSES 2 CHOOSING THE EVERSIFICATION PATH : RELATED VS. UNRELATED BUSINESSES 3 EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY

STRATEGIES FOR ENTERING NEW BUSINESSES Chapter 8. Diversification 1 STRATEGIES FOR ENTERING NEW BUSINESSES Acquisition of an Existing Business Internal Start-up Joint Ventures

CHOOSING THE EVERSIFICATION PATH Chapter 8. Diversification 2 CHOOSING THE EVERSIFICATION PATH DIVERSIFYING INTO RELATED BUSINESSES Representative Value Chain Activities Business A Support Activities Supply Chain Activities Technology Operations Sales And marketing Distribution Customer Service Technology of skills transfer, cost reduction, common brand-name usage Cross-business collaboration Business B Supply Chain Activities Technology Operations Sales And marketing Distribution Customer Service Support Activities

An absence of competitively valuable Chapter 8. Diversification 2 CHOOSING THE DIVERSIFICATION PATH 2) DIVERSIFYING INTO UNRELATED BUSINESSES Representative Value Chain Activities Business A Value Chain Support Activities Product R&D, Engineering, Design Production Advertising, Promotion Sales to Dealer Newyork An absence of competitively valuable strategic fits Business B Value Chain Product R&D, Engineering, Design Production Advertising, Promotion Sales to Dealer Newyork Support Activities

CHOOSING THE DIVERSIFICATION PATH Chapter 8. Diversification 2 CHOOSING THE DIVERSIFICATION PATH BUT Indeed, in actual practice the business makeup of diversified companies varies considerably. Others are broadly diversified around a wide-ranging collection of related businesses, unrelated businesses, or a mixture of both.

EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Chapter 8. Diversification 3 EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Step 1 : Evaluating Industry Attractiveness Does each industry the company has diversified in to represent a good business for the company to be in? Which the company's industries are most attractive and which are least attractive? How appealing is the whole group of industries in which the company has invested?

EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Chapter 8. Diversification 3 EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Step 1 : Evaluating Industry Attractiveness * The measures Market size and projected growth rate Seasonal and cyclical factors Social, political, regulatory, and environmental factors The intensity of competition Emerging opportunities and threats Industry profitability Industry uncertainty and business risk The presence of cross- Industry strategic fits Resource requirements

EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Chapter 8. Diversification 3 EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Step 2 : Evaluating Business-Unit Competitive Strength Relative market share Caliber of alliances and collaborative partnerships with suppliers or buyers Costs relative to competitors‘ costs Brand image and reputation Ability to match or beat rivals on key product attributes Competitively valuable capabilities Ability to benefit from strategic fits with sister businesses Profitability relative to competitors Ability to exercise bargaining leverage with key suppliers or customers

EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Chapter 8. Diversification 3 EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Step 3 : Checking the Competitive Advantage Potential of Cross-Business Strategic Fits Realize economies of scope or cost-saving efficiencies Transfer technology, skills, know-how, or other resource capabilities from one business to another Leverage use of a well-known and trusted brand name Build new or stronger resource strengths and competitive capabilities via cross-business collaboration

EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Chapter 8. Diversification 3 EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Step 4 : Checking for Resource Fit - Businesses add to a company's resource strengths A company has the resources to adequately support the resource requirements There are close matches between a company's resources and industry key success factors

EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Chapter 8. Diversification 3 EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Step 5 : Ranking the Performance Prospects of Business Units and Assigning a Priority for Resource Allocation Sales growth Profit growth Contribution to company earnings Return on capital invested in the business

EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Chapter 8. Diversification 3 EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY Step 6 : Crafting New Strategic Moves to Improve Overall Corporate Performance - Sticking with the existing business lineup Broadening the firm's business base by diversifying onto additional businesses Retrenching to a narrower diversification base by divesting some of its present businesses Restructuring the company's business lineup with a combination of divestitures and new acquisitions Pursuing multinational diversification and striving to globalize the operations

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