Diversification Flashcards
(37 cards)
Expansion or extension of the firm by integrating preceding or successive production processes
Vertical Integration (occurs when firm becomes it’s own supplier/distributor)
The improvement in bargaining position relative to suppliers and customers
Pooled Negotiation Power
Business within a larger organization that operates as an independent entity with its own market, objectives, and resources
Specific Business Unit
Resources of Related Diversification includes
Market power, pooled negotiating power, and vertical integration opportunities
Process of firm’s expanding their operations by entering new businesses
Diversification
The positive contributions of the corporate office to a new business as a result of expertise and support provided
Corporate Parenting
Having activities of two or more businesses’ value chains done by one of the businesses
Sharing Activites
Cost savings from leveraging core competencies or sharing related activities among businesses in a corporation
Economies of Scope
A firm’s strategic resources that reflect the collective learning in the organization
Core Competencies
Why should companies even bother with diversification?
Synergy “working tg”
The intervention of the corporate office in a new business that substantially changes the assets, capital structure, and/or management, including selling off parts of the business, changing the management, reducing payroll and unnecessary sources of expenses
Restructuring
Combination or consolidation of two firms to form a new legal entity,
Mergers (VERY RARE - Kraft-Heinz)
Involve one firm buying another through stock purchase, cash, or issuance of debt
Acquisitions (happen more frequently)
Why do diversification ventures fail?
Paid too high a premium for target’s common stock, and unable to understand how the acquired firm’s assets would fit with their own lines of business
Method of assessing the competitive position of a businesses within a corporation, suggesting strategic alternatives for each business, and identifying priorities for the allocation of resources across the businesses.
Portfolio Management
High market share in a slow growth industry
Cash Cow
Low market share in a high growth industry
Question Mark
Entering a new business through investment in new facilities
Internal Development
Clusters of firms that share similar strategies
Strategic Groups
New entity is created in which two or more firms, the parents, contribute equity to form the legal entity.
Joint Ventures
A cooperative relationship between two or more firms to work together towards a shared business goal
Strategic Alliance
Visually compares how consumers view competitors based on price and quality. Business units within a certain industry.
Perceptual Mapping
Meant to analyze a firm’s portfolio in the event that they are part of multiple industries. Analyze within all industries.
BCG Growth/ Share Matrix
A firm entering a different business in which it can benefit from leveraging core competencies, sharing activities, or building market power
Related Diversification
