As i said in the previous post, today i'll try to post as much as i can, regarding to my subject (Strategic Management). So, now i'll share about the chapter 8, which is 'Corporate Strategy, Diversification and The Multibusiness Company'. Actually, i dont really remember what i had learned in this chapter, maybe because i feel sleepy at that time..(huhu, sorry miss). But, i'll try to write, based on my notes and power point slide.:)
Before I jump to the strategies, i want to state the definition of corporate diversification, first. It is a process when a company expand their business into different areas, such as industries and product lines. Companies typically do this in order to build the business. So, basically, there two types of corporate diversification, which are related and unrelated.
1- Related
- When the company consists of an overarching structure that supports all of its different business.
- Have competitively valuable cross-business value chain and resource match ups.
2- Unrelated
- When a company consists of a series of individual businesses that do not share things such as customers and distribution channels.
- Have dissimilar value chains and resource requirements, with no competitively important cross-business relationship at the value chain level.
Diversifying into related businesses where competitively valuable strategic-fit benefits can be captured puts a company’s businesses in position to perform better financially as part of the company than they could have performed as independent enterprises, thus providing a clear avenue for boosting shareholder value and satisfying the better-off test.
-Creating added value for shareholders via diversification requires building a multibusiness company where the whole is greater than the sum of its parts-an outcome. Or in simple form, 1+1=3
Three approaches to diversifying the business lineup
1- Acquisition of an existing business
- An acquisition premium is the amount by which the price offered exceeds the pre-acquisition market value of the target firm.
- Example : Affin Investment Bank and Hwang-DBS (M) Bhd
2- Internal new venture (start-up)
- Is the process of developing new businesses as an outgrowth of a firm's established business operations. It is also referred to as corporate entrepreneurship or intrapreneurship since it requires entrepreneurial-like qualities within a larger enterprise.
- Example : Tabung Haji venturing into food business
3- Joint venture
- Is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity.
- Sime Darby joint venture with Thailand's PTT Chemical International
So, that's all for this chapter...Sorry, i cannot share many things about this chapter. See you in next post..:)
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