“Diversification” Please respond to the following:From the e-Activity, suggest one way the company you researched could increase its level of value-creating diversification. Provide specific examples to support your response.Building on the topic above, determine how diversified the company you research could become before it created a negative impact on the company’s bottom line. Explain your rationale. Week 5 eActivitiesUse the Internet or the Strayer Library to research a large corporation headquartered in your home state, with a focus on its current level of diversification. Be prepared to discuss. Use the Internet or the Strayer Library to research the corporate-level strategies of Victory Motorcycles. Be prepared to discuss.Senior Seminar in Business Administration
BUS 499
Corporate-Level Strategy
Objectives
• Upon completion of this lesson, you will be
able to:
– Identify various levels and types of strategy in
a firm
Supporting Topics
• Levels of Diversification
• Reasons for Diversification
• Value-Creating Diversification: Related
Constrained and Related Linked Diversification
• Unrelated Diversification
• Value-Neutral Diversification
• Value-Reducing Diversification: Managerial
Motives to Diversify
Levels of Diversification
• How Firms Vary
– Level of diversification
– Connections among their businesses
• Single Business Diversification Strategy
• Related Constrained Diversification
Strategy
• Unrelated Diversification Strategy
Reasons for Diversification
• Corporate Level Diversification Strategies
– Increase a firm’s value
• Related or unrelated diversification
– Neutral effects
• Value-neutral reasons for diversification
• Two Diversification Strategies to Create
Value
– Operational Relatedness
– Corporate Relatedness
Value-Creating Diversification
• Diversification Corporate-Level Strategy
– Builds upon or extends resources and
capabilities
• Creates value
• Economies of Scope
• Two Ways to Create Value
– Sharing activities
– Transferring corporate-level core
competencies
Value-Creating Diversification, continued
• Creating Operational Relatedness
– Sharing a primary activity or support activity
– Create value through related constrained
diversification strategy share activities
• Activity sharing is risky
– Ties among businesses create links between
outcomes
• Research shows activity sharing can
create value
Value-Creating Diversification, continued
• How Time Comes Into Play
– Intangible resources become the foundation
of core competencies
• Corporate-Level Competencies
• Two Ways Related Linked Diversification
Strategies Help Create Value
Value-Creating Diversification, continued
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•
•
•
Market Power
Multipoint Competition
Vertical Integration
Creating Economies of Scope
– Firms seek operational and corporate
relatedness
• Diseconomies
PROPERTIES
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Unrelated Diversification, continued
• What are Financial Economies
• Market Economies
– Capital markets are thought to allocate capital
– Efficiency results from investors taking equity
positions
• Large Diversified Firms
Unrelated Diversification, continued
• Financial Economies
• When a Company Has Become Diversified
• High Technology Businesses
– Highly complex resource allocation decisions
– Human resource dependent
• Buying and Restructuring Service-Based
Assets
Value-Neutral Diversification
• Incentives to Diversify
– External
• Antitrust regulations
• Tax laws
– Internal
• Low performance
• Uncertain cash flows
• Pursuit of synergy and reduction
• Government Antitrust Policies and Tax
Laws
Value-Neutral Diversification, continued
• Corporate Level Diversity Strategy
Requirements
– Types and levels of resources
– Capabilities
• Importance of Resources
– Example of free cash lows
Value- Reducing Diversification: Managerial
Motives to Diversify
• Managerial Motives to Diversify
– Reasons
• Value-neutral
• Vale-creating
• Additional Benefits for Top-Level Managers
– As firm size increases so does executive
compensation
• Governance Mechanisms to Limit Managerial
Tendencies
PROPERTIES
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Summary
• Levels of Diversification
• Reasons for Diversification
• Value-Creating Diversification: Related
Constrained and Related Linked Diversification
• Unrelated Diversification
• Value-Neutral Diversification
• Value-Reducing Diversification: Managerial
Motives to Diversify
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