Real Types of Diversification Strategies - An Analysis of Different Types of Relatedness in German Companies

Diplomarbeit aus dem Jahr 2008 im Fachbereich BWL - Unternehmensfhrung, Management, Organisation, Note: 1,7, Handelshochschule Leipzig gGmbH, Sprache: Deutsch, Abstract: On corporate level main strategic decisions involve the question which businesses are to be pursued and which to be neglected, i.e. how the portfolio of businesses is designed. The ultimate goal is a value adding business portfolio.

This added value arises from synergies among the businesses and the role of the corporate center. In the case of success this would lead to a conglomerate premium in terms of company value.

Corporate managers are generally very free in deciding what businesses they want to add to their portfolio and which to divest. This raises two questions: one regarding the type of businesses in a portfolio and the other regarding the optimal size of a portfolio. The term diversification deals with both questions: it describes how broad and how diverse a companys business portfolio is. On the one hand it can be very narrow or focused in a barely diversified company, on the other it can be very broad in a highly diversified company. Three forms of diversification strategies are commonly distinguished: focused, relational and conglomerate diversification.

Many researchers in the field of strategic management have dealt with the question of diversification and the pros and cons involved. Yet there is no clear hint on superior performance of certaint diversification strategies. Rather success stories for many forms can be told.

Further findings indicate: not the degree of diversification is relevant for success but the relatedness among strategic business units. Portfolios of somehow related SBUs perform better than those completely unrelated. Success is explained by the ability to transfer core competencies ("resources") among the business units of a company.

Yet relatedness is a manifold concept. Two main types have to be distinguished: relatedness on the level of products and pr