Implementing Diversification Strategies

A central concept to understanding and proposing diversification strategies is relatedness. A range of diversification strategies-from highly related to highly unrelated -can be observed.

Pitts and Hopkins (1982) have conducted an extensive literature review and summary on this topic. As they suggested, "the first tasks facing a researcher wishing to measure a firm's diversity therefore, is to identify its individual businesses".

In this review of strategic diversity, Pitts and Hopkins cite three primary approaches:

* The first, resource independence, sees a business as discrete from others of the corporation if the "resources involved are separate from those supporting the firm's other activities."

* The least-employed approach, due to data collection difficulties, defines businesses in terms of market discreteness.

* Finally, businesses can be defined in terms of product differences, viewing each product offering as a separate business.

Pitts and Hopkins here note two primary approaches to the measurement of diversity: (1) the first is based upon the number of businesses in which the firm is positioned; (2) the second approach is termed strategic and assesses diversity by either the relatedness of various businesses or the firm's historical growth pattern.

Rumelt developed, as a variation of Wrigley's (1970) scheme, a typology -single business, dominant business, related business, and unrelated business -according to the degree of strategic interdependence across businesses as well as "the proportion of a firm's revenues that can be attributed to its largest single business in a given year". Nathanson (1980) has developed a system that captures both product and market diversity.


Previous page Next page
The Nature Of Strategy Implementation
The information on this page may not be reproduced, republished or mirrored on another webpage or website.
Copyright 1998-2014 24xls.com