Term
| Corporate diversification strategy |
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Definition
| when a firm operates in multiple industries or markets simultaneously |
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Term
| product diversification strategy |
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Definition
| when a firm operates in multiple industries simultaneously |
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Term
| geopgraphic market diversification strategy |
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Definition
| when a firm operates in multiple geographic markets simultaneously |
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Term
| Three Types of Corporate Diversification |
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Definition
Limited- when all or most of a business activites fall within a single industry or market
Single business- 95% or more of firms revenue comes from a single business
Dominant business- between 70-95% comes from one source
Related- when less than 70% of a firms revenue comes from a single product market, and these multiple lines of the business are linked
constrained- and different business share numerous links and common attributes
related links- different business share only a few links or common attributes
Unrelated- when less than 70% of a firms revenue comes from a single business, and there are few, if any links or commons attributes between business |
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Term
| The value of corporate diversification |
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Definition
| Two conditions: There must be some valuable Economies of Scope among business. Must be less costly for managers in a firm to realize these economies of scope than outside equity holders on their own. |
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Term
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Definition
| When the value of the products or services of a firm increases as a function of the number of businesses that it has |
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Term
| 4 Types of economies of scope |
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Definition
| Operational, Financial, Anti-Competitive, Employee and stakeholder incentives for diversification. |
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Term
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Definition
Shared activities: business activities that may be shared across several different businesses in a diversified firm
Core Competencies: The complex set of resources and capabilites that link the different businesses in a diversified firms through managerial and technical knowhow and wisdom |
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Term
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Definition
Internal Capital Allocation: business in a diversified firm compete for corporate capital
Risk Reduction |
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Term
| 4 types (Anti-Competitive) |
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Definition
| based on the relationship between diversification strategies and various anti-competitive activities |
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Term
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Definition
| Firms cooperate to reduce the rivalry below the level below perfect competition |
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Term
| 4 types (incentives for diversification) |
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Definition
| managers get paid by size of firm, so expanding generates them more income |
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Term
| substitutes for diversification |
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Definition
a firm may decide to grow and develop each business separately:
Strategic Alliance |
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