Corporate Strategy Diversification - Prof. Dr. Bernd Venohr
Corporate Strategy Diversification - Prof. Dr. Bernd Venohr
Corporate Strategy Diversification - Prof. Dr. Bernd Venohr
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Empirical results diversification and firm performance:<br />
moderate levels of diversification yield<br />
higher levels of performance than either limited<br />
or extensive diversification (2)*<br />
� Key results<br />
– most profitable firms are those that have diversified around a set of resources that<br />
are specialized enough to confer an advantage in an attractive industry, yet<br />
fungible enough to be applied in other industries<br />
– least profitable are those that are broadly diversified and whose strategies are<br />
built around very general resources that are applied in a wide variety of industries<br />
but are rarely instrumental in competitive advantage in an attractive industry<br />
� Limits of diversification<br />
– Bureaucratic costs place a limit on the amount of diversification that can profitably<br />
be pursued<br />
– Arise in large, complex organizations due to managerial inefficiencies (diverse<br />
businesses in a company’s portfolio; Information overload; coordination among<br />
businesses)<br />
*Source: Palich/ Cardinal/ Chet Miller, 2000<br />
© 2006 <strong>Dr</strong>. <strong>Bernd</strong> <strong>Venohr</strong><br />
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