1. Corporate-level strategy
Specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets
Expected to help firm earn above-average returns
Value ultimately determined by degree to which “the businesses in the portfolio are worth more under the management of the company then they would be under any other ownership
Product diversification (PD): primary form of corporate-level strategy

2. Goals of Corporate Strategy
Moves to enter new businesses
Boosting combined performance of the businesses
Capturing synergies and turning them into competitive advantages
Establishing investment priorities and steering resources into business units

3. 4 Conditions of Successful Diversification
1) Growing industries with complementary products and technologies
Apple IPhone
2) Leverage existing capabilities which match the KSFs in other arenas
Disney Cruise Lines
3) Closely related moves which reduce costs
Kroger & Fred Meyer
4) Powerful brand and reputation
Margueritaville, NASCAR Café, or Emril’s

4. Levels of Diversification (N=3)
1. Low Levels
Single Business Strategy
Corporate-level strategy in which the firm generates 95% or more of its sales revenue from its core business area
Dominant Business Diversification Strategy
Corporate-level strategy whereby firm generates 70-95% of total sales revenue within a single business area

5. Levels of Diversification (N=3) (Cont’d)
2. Moderate to High Levels
Related Constrained Diversification Strategy
Less than 70% of revenue comes from the dominant business
Direct links (I.e., share products, technology and distribution linkages) between the firm's businesses
Related Linked Diversification Strategy (Mixed related and unrelated)
Mixed: Linked firms sharing fewer resources and assets among their businesses (compared with related constrained, above), concentrating on the transfer of knowledge and competencies among the businesses

6. Levels of Diversification (N=3 ) (Cont’d)
3. Very High Levels: Unrelated
Less than 70% of revenue comes from dominant business
No relationships between businesses

7. Drawbacks for Unrelated
Demanding requirements
Limited to no opportunities to share advantages

8. Levels and Types of Diversification

9. The Curvilinear Relationship between Diversification and Performance

10. When/Why to Diversify? To create shareholder value
Porter’s Three Point Test
1) Attractiveness Test
2) Cost of Entry Test
3) Better off Test
Should pass all 3