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

2. Contents STRATEGIES FOR ENTERING NEW BUSINESSES1
STRATEGIES FOR ENTERING NEW BUSINESSES 2
CHOOSING THE EVERSIFICATION PATH : RELATED VS. UNRELATED BUSINESSES 3
EVALUATING THE STRATEGY OF A DIVERSIFIED COMPANY

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

4. 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

5. 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

6. 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.

7. 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?

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. Thank you~