Diversification

Question 1

two main forms of diversification?

Answer 1

related and unrelated

Question 2

related diversification?

Answer 2

involves activities in the supply chain or leveraging existing competencies

Question 3

integrating activities in the supply chain is…

Answer 3

vertical integration

Question 4

vertical integration?

Answer 4

integrating activities in the supply chain

e.g., merging with a supplier
e.g., merging with a distributor

Question 5

benefits/negatives of vertical integration?

Answer 5

• guaranteed supply/demand
• economies of combined operations

however

• increased capital needs
• increased fixed costs

Question 6

horizontal integration?

Answer 6

companies using existing competencies by entering into:
- complementary markets (e.g., google acquiring YouTube)
- competing markets (e.g., honda motorcycles/cars)

Question 7

unrelated diversification?

Answer 7

no common thread between two companies combining

synergies can still be achieved

Question 8

potential synergies from unrelated diversification

Answer 8

• management skills
• brand name/reputation

Question 9

risk associated with unrelated diversification?

Answer 9

• lack of experience in new market