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Companies’ implements related diversification strategies in order to achieve and exploit economies of scope and build a competitive advantage by building on existing resources, capabilities, and core competencies.
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As a small business owner looking for business growth, a diversification strategy of acquisition can be very attractive. But you need to understand the differences between related diversification and unrelated diversification before you invest.
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Related diversification is developemt beyond the present product and market, but still within the broad confines of the ‘industry’ (i.e. value chain) in which a company operates. (Johnson Scholes page 323) Unrelated diversification is where the organisation moves beyond the confines of its current industry.
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Related diversification occurs when the firm expands into similar product lines. ... Related diversification occurs when the firm expands into similar product lines. For example, an automobile manufacturer may engage in production of passenger vehicles and light trucks.
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In foreign context a good example of a related diversification is that of Gillette, which has diversified from its main business of razors and blades to related businesses like toiletries, tooth brushes etc. various other examples of related diversification are Johnson & Johnson, PepsiCo.
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Summary of Strategies of Related Diversification, by Bharat N. Anand. Find this and other business articles and publications at Harvard Business School Publishing. ... Strategies of Unrelated Diversification...
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(1982): The highest levels of profitability are exhibited by those companies having a related diversification strategy. The lowest profitability were vertically integrated businesses and unrelated diversifiers.
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Using data from real estate corporations, we report that related diversification over different property types is associated with a discount while geographical diversification has no significant effect on shareholder value. ... Keywords: Related diversification; agency costs; peso effect; shareholder value.;
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Businesses adopting a related diversification strategy are defined as corporations that had diversified into activities with some apparent similarities to ...
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