a corporate-level strategy that involves a company entering new industries to increase its long-run profitability

Under certain circumstances, companies can realize the advantages of vertical integration, without experiencing problems due to low incentive to contain cost or due changing technology, by entering into cooperative outsourcing relationship with suppliers or distributors

promotes a company`s competitive advantage

the process of entering one or more industries that are distinct or different from a company`s core or original industry

one that operate in to two or more industry to find ways to increase its long run profitability.

Certain senior executives develop superior skills in managing and overseeing the operation of many business units and pushing the managers in charge of these business units to achieve high performance

A strategy in which a company acquires inefficient and poorly managed enterprises and creates value by putting a superior financial governance structure in place in these acquired companies. This strategy can be can be considered diversification because the acquired company does not have to be in the same industry as the acquiring company.

Top managers seek out companies in new industries where they believe they can apply these competencies to create value and increase profitability. Alternatively, corporate managers may decide to acquire a company in a different industry because they believe the acquired company possesses superior skills that can improve the efficiency of their existing value creation activities.

The strategy of operating a business unit in a new industry that is related to a company's existing business units through some commonality in their value chains.

The strategy of operating a business unit in a new industry that has no value chain connection with a company's existing business units.

A company pursuing unrelated diversification

can create value by resource sharing and by transferring competencies between businesses.

cannot create value by sharing resources or transferring competencies.

can create value only by pursuing an acquisition and restructuring strategy.

can create value in more ways

concentrate on fewer businesses

The phenomenon that shares of stock in highly diversified companies are often assigned a lower market valuation than shares of stock in less diversified companies.

Strategies Exit:

Selling a business unit to the highest bidder.

The sale of a business unit to another company or to independent investors.

The sale of a business unit to its current management

The halting of investment in a business unit to maximize short to medium term cash flow from that unit. This strategy seems fine in theory, it is often a poor one to apply in practice.

The shutting down of the operations of a business units and the sale of its assets. It requires that the company write off its investment in a business unit, often at considerable cost.

Is the process of acquiring or merging in the industry competitors in an effort to achieve the competitive advantages that come with large size or scale.

The strategy a company adopts when it focuses its resources and capabilities on competing successfully within a particular product market.

occurs when the company uses its capital resources to purchase another company and merge is an agreement between two companies to pool their resources in a combined operation.

Profitability increases when horizontal integration results in four major benefits:

Achieving economies of scale is very important in industries that have high fixed costs, because large-scale production allows company to spread its fixed costs over a large volume, which drives down average operating costs.

May boost profitability when it increases product differentiation, by, for example, allowing a company to combine the product lines of merged companies in order to offer customers a wider range of products that can be bundled together.

the strategy of offering customers the opportunity to buy a complete range of the product they need a single, combined price.

Acquiring or merging with a competitor helps to eliminate excess capacity in an industry, often triggers price wars. By taking excess capacity out of an industry, horizontal integration creates a more benign(gentle) environment in which prices might stabilize or even increase.

which strengthens its competitive position and increasing its profitability at their expenses. By using horizontal integration to consolidate its industry, company becomes a much larger buyer of a supplies product it can use this buying power as leverage to bargaining don the price it pays for inputs, and this also lowers its costs.

has been coined to describe companies that outsource most of their functional activities and focus on one or a few core value chain functions.

A second tactic that a company may deploy to improve its competitive position in an industry is to outsource one or more of its own value creation functions and contract with another company to perform that activity on its behalf.