Unrelated diversification can create value through two types of financial economies:
efficient internal capital market allocation and restricting a firm’s assets
. In a market economy, capital markets are thought to efficiently allocate capital.
What are the two types of diversification strategies?
- Concentric diversification. Concentric diversification involves adding similar products or services to the existing business. …
- Horizontal diversification. Horizontal diversification involves providing new and unrelated products or services to existing consumers. …
- Conglomerate diversification.
Unrelated diversification can create value
through two types of financial economies (cost savings)
. 1) Unrelated diversified firms can more efficiently allocate capital among the component businesses than can the external financial market. … High corporate performance eliminates the need for diversification.
The two biggest drawbacks or disadvantages of unrelated diversification are:
Demanding managerial requirements and limited competitive advantage potential
.
A way in which a firm uses related diversification to create value for its customers by extending resources and capabilities across its businesses is called:
economies of scope
. How can sharing primary or supporting activities throughout a firm’s businesses create value?
The benefits of unrelated diversification are rooted in two conditions: (1)
increased efficiency in cash management and in allocation of investment capital
and (2) the capability to call on profitable, low-growth businesses to provide the cash flow for high-growth businesses that require significant infusions of cash.
Unrelated diversification:
When a firm enters an industry that lacks any important similarities with the firm’s existing industry or industries
.
What are the four methods of diversification?
- Horizontal diversification.
- Vertical diversification.
- Concentric diversification.
- Conglomerate diversification.
- Defensive diversification.
- Offensive diversification.
What are the three types of diversification?
There are
three types of diversification
: concentric, horizontal, and conglomerate.
What is an example of diversification?
For example,
an auto company may diversify by adding a new car model
or by expanding into a related market like trucks. … If a company is expanding into industries that are unrelated to its current business, then it’s engaging in conglomerate diversification.
What makes related diversification an attractive strategy?
The greater the relatedness among a diversified company’s sister businesses
, the bigger a company’s window for converting strategic fits into competitive advantage via … by capturing strategic benefits.
The two biggest drawbacks or disadvantages of unrelated diversification are:
Demanding managerial requirements and limited competitive advantage potential
.
▪ What makes related diversification an attractive strategy is
the
.
opportunity to convert cross-business strategic fits into a competitive
.
advantage over business rivals whose operations do not offer
.
comparable strategic fit benefits
. ▪ The greater the relatedness among a diversified company’s sister.
Which of the following is the best example of related diversification?
stem from cost-saving strategic fits along the value chains of related businesses
.
What are the different levels of diversification?
- Low Levels of Diversification.
- Moderate to High Levels of Diversification.
- Moderate to High Levels of Diversification.
What are functional area strategies?
A functional strategy is
the approach a business functional takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity
. … A functional strategy helps set objectives that guide the optimum allocation of resources among different business functions.
