Corporate-Level Strategy: Creating Value through Diversification

A set of vocabulary flashcards covering key concepts from Corporate-Level Strategy, including types of diversification, integration strategies, and portfolio management.

Diversification

The process of firms expanding their operations by entering new businesses.

Portfolio management

The activity of assessing the competitive position of a portfolio of businesses within a corporation, suggesting strategic alternatives for each business, and identifying priorities for the allocation of resources across the businesses.

Related businesses

Businesses that create value by sharing tangible and intangible resources.

Unrelated businesses

Businesses where value creation derives from the corporate office and leveraging support activities.

Horizontal Integration

A type of corporate strategy that includes both Related Diversification (such as Disney or Proctor & Gamble) and Unrelated Diversification (such as Tyco, Textron, or General Electric).

Vertical Integration

A corporate strategy involving forward integration (owning distribution/retail channels) or backward integration (producing own components/raw materials).

Forward Integration

A form of vertical integration where a firm owns distribution and/or retail channels.

Backward Integration

A form of vertical integration where a firm produces its own components or raw materials.

Unrelated diversification

A firm entering a different business that has little horizontal interaction with other businesses of a firm.

Transaction Cost Perspective

The theory that the choice of a transaction’s governance structure is influenced by costs such as search, negotiating, contracting, monitoring, and enforcement.