1. What is Diversification?
„ A collection of businesses under one
corporate umbrella

2. Diversification and
Corporate Strategy
„ A company is diversified when it is in two or
more lines of business
„ Strategy-making in a diversified company is a
bigger picture exercise than crafting a strategy for
a single line-of-business
ƒ A diversified company needs a multi-industry, multi-
business strategy
ƒ A strategic action plan must be developed for several
different businesses competing in diverse industry
environments

3. Diversification and
Corporate Strategy
„ In addition to a business strategy which
identifies and maintains a sustainable
competitive advantage in each of the
business units, a coherent corporate
strategy is needed which creates value
and is internally consistent.

4. When do we diversify?
„ When a company runs out of growth
opportunities in the core business and not
before!
„ When diversification results in creation of
value

5. COMMENT: TREND IN
DIVERSIFICATION
The present trend toward narrower
diversification has been driven by a
growing preference to gear
diversification around creating strong
competitive positions in a few, well-
selected industries as opposed to
scattering corporate investments across
many industries!