MGTS3301 Lecture Notes - Lecture 4: Horizontal Integration, Vertical Integration, Kraft Foods Inc
Document Summary
Diversification: involves growing into new business areas either related (similar) or unrelated (different) to existing business: allows a firm to create value by productively using excess resources, diversified firms: Operate in several different and unique product markets and likely in several businesses. Uses two types of strategies: corporate-level (or company-wide) and business-level (or competitive) Profitability variability is reduced as earnings are generated from different businesses. It offers independence/flexibility to shift investments to those markets with the greatest returns. Levels of diversification: a firm"s diversified businesses are related when they share links across: Distribution channels. technologies: the more links among businesses, the more constrained" is the relatedness of diversification. Unrelated" refers to the absence of direct links between businesses. Single business strategy corporate-level strategy in which the firm generates 95 per cent or more of its sales revenue from its core business area: example: wrigley.
