Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
diversification was a very popular strategy several years ago. During that time, several
conglomerates such as ITT and Transamerica grew by acquiring literally hundreds of
other organizations and then running these numerous businesses as independent entities.
Even if there are important potential synergies among their different businesses, organi-
zations implementing a strategy of unrelated diversification do not attempt to exploit
them.
In theory, unrelated diversification has two advantages. First, a business that uses this
strategy should be able to achieve stable performance over time. During any given
period, some businesses owned by the organization are in a cycle of decline, whereas
others may be in a cycle of growth. Second, unrelated diversification is also thought to
have resource allocation advantages. Every year, when a corporation allocates capital,
people, and other resources among its various businesses, it must evaluate information
about the future of those businesses so that it can place its resources where they have
the highest potential for return. Given that it owns the businesses in question and thus
has full access to information about the future of those businesses, a firm implementing
unrelated diversification should be able to allocate capital to maximize corporate
performance.
Despite these presumed advantages, research suggests that unrelated diversification
usually does not lead to high performance. First, corporate-level managers in such a
company usually do not know enough about the unrelated businesses to provide helpful
strategic guidance or to allocate capital appropriately. To make strategic decisions, man-
agers must have complete and subtle understanding of a business and its environment.
Because corporate managers often have difficulty fully evaluating the economic impor-
tance of investments for all the businesses under their wing, they tend to concentrate
only on a business’s current performance. This narrow attention at the expense of
broader planning eventually hobbles the entire organization.
Second, because organizations that implement unrelated diversification fail to exploit
important synergies, they are at a competitive disadvantage compared to organizations
that use related diversification. Universal Studios has been at a competitive disadvantage
relative to Disney because its theme parks, movie studios, and licensing divisions are less
integrated and therefore achieve less synergy.
For these reasons, almost all organizations have abandoned unrelated diversification
as a corporate-level strategy. Transamerica, for instance, sold off numerous unrelated
businesses and now concentrates on a core set of related businesses and markets.
Large corporations that have not concentrated on a core set of businesses have eventu-
ally been acquired by other companies and then broken up. Research suggests that
these organizations are actually worth more when broken up into smaller pieces than
when joined.
28
Do'stlaringiz bilan baham: