Corporate Diversification

These flashcards are designed to help you review key concepts and vocabulary related to corporate diversification.

Corporate Diversification

A strategy where a firm operates in multiple industries or geographic markets simultaneously.

Product Diversification

A form of corporate diversification where a firm operates in multiple industries.

Geographic Market Diversification

A form of corporate diversification where a firm operates in multiple geographic markets.

Product-Market Diversification

A form of corporate diversification that involves both product and geographic market diversification.

Limited Corporate Diversification

Exists when most of a firm’s activities are within a single industry and market.

Single-Business Firms

Firms that derive 95% of sales from a single product market.

Dominant-Business Firms

Firms that derive between 70% to 95% of sales from a single product market.

Related Corporate Diversification

Exists when less than 70% of revenues come from a single market and multiple businesses are linked.

Related-Constrained Diversification

A subtype of related diversification where businesses share significant inputs and capabilities.

Related-Linked Diversification

A subtype of related diversification where sharing between businesses is limited.

Unrelated Corporate Diversification

Exists when a firm’s businesses share few common attributes.

Economies of Scope

The value that comes from a firm operating in multiple businesses, leading to cost reduction or increased revenue.

Operational Economies of Scope

Exists when businesses share activities across their operations.

Shared Activities

Components of the value chain that different businesses can utilize collectively to lower costs.

Core Competencies

Complex sets of resources and capabilities that enable a firm to link and manage different businesses.

Weakness of Shared Activities

Challenges that can arise from the limitation of a firm's ability to meet customer needs due to shared activities.

Risk Reduction through Diversification

The concept that a firm can lower its overall risk by engaging in businesses with low correlation between cash flows.