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Strategic Management

Please help me with these two short essay questions:

1) Explain the benefits of related and unrelated diversification strategies.
2) Explain the reasons why multinational diversification strategies are so attractive.

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RESPONSE:

1) Explain the benefits of related and unrelated diversification strategies

You will have an introduction (introducing your topic, with a purpose statement: The purpose of this paper is to explain the benefits of related and unrelated diversification strategies), body (related and unrelated) and conclusion.

I. Introduction (introduce the topic of diversification, including purpose statement)
II. Diversification Strategies
a. Related (definition and several benefits of different strategies)
b. Unrelated (definition and several benefits of different strategies)
III. Conclusion (restate purpose statement in slightly different words, and sum up main points).

Now let's look at some information to consider for the above outline.

There are two type of diversification: related and unrelated. Diversification is RELATED when a firm has several lines of business that, although distinct, possess some kind of STRATEGIC FIT to gain competivenss advantage. Unrelated diversification has the same aim, which involves NO common linkage of strategic fit among a diversified firm's lines of business or meaningful value chain interrelationships. It is a corporate strategy approach to venture into "any industry & any business in which we think we can make a profit." Firms pursuing unrelated diversification are referred to as, with no unifying strategic theme http://www.csuchico.edu/mgmt/strategy/module7/tsld040.htm

Also see http://www.csuchico.edu/mgmt/strategy/module7/sld048.htm.

The two principal objectives of diversification are:

1. Improving core process execution, and/or
2. Enhancing a business unit's structural position.

The fundamental role of diversification, both related and unrelated), and thus the benefit, is for corporate managers to create value for stockholders in ways stockholders cannot do better for themselves1. The additional value is created through synergetic integration of a new business into the existing one thereby increasing its competitive advantage. (Advantage) http://www.1000ventures.com/business_guide/im_diversification_strategies.html

Different forms have different advantages. Diversification typically takes one of three forms:

o Vertical integration - the main advantage is to move along your value chain both upstream and downstream, so that one efficiently feeds the other
o Horizontal diversification - the main advantage is moving into new industry into new geographical area to overcome limited growth opportunities in the local market and/or to gain global leadership positions
o Geographical diversification - the main advantage id to open up new markets ...

Solution Summary

This solution explains the benefits of related and unrelated diversification strategies and also explains the reasons why multinational diversification strategies are so attractive.

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