Business Diversification Theory : The Studies
Various findings from these studies are related to Business Diversification Theory.
The Advantages and Disadvantages of Corporate Diversification
A review about corporate diversification and organizational structure found that it is only beneficial in cases where the company can obtain preferential access to strategic assets such as valuable, rare, imperfectly tradable, and costly to imitate. As the advantage this access affords will decay as a result of asset erosion and imitation by single- Rivalry, in the long run only corporate diversification can be justified.
Resource-Based Corporate Growth: A Transformative Approach
A study about Corporate Growth and Diversification found that, though costly in terms of resources and time, resource-based theories of corporate growth offer a promising approach to improving business efficiency. This is because resources are precious and can be used efficiently to produce results in specific areas of activity.resource-based theories stress the importance of investing resources where they can do the most good. diversification, on the other hand, allows businesses to options menu of activities and investment opportunities available to them which could further their business goals. By understanding Corporate Growth and Diversification through these lenses, businesses can make better decisions about how they allocate their limited resources.
The structural biases of business diversification
A study about the 1949-1969 American business diversification strategy yielded the conclusion that related and dominant businesses perform best; the worst performance is non-related diversified and vertically integrated enterprises. Due to the extension of core capabilities or resources, there is limited effort made by firms in specific industries to adapt their strategies to the competitive environment. The study also convincingly argues that businesses should focus on creating new markets rather than expanding their current ones.
Diversifying Your Business And Reducing Risks
A study about the impact of industry diversification on risk-return performance has found that the strategy can lead to a reduction in risk, but can also lead to an increase in error. In order toshore through diversification, companies may need to Invest more resources in new endeavors while traditionally exposed products may have to be phased out in order to leave room for new investment.
The Effect of Information asymmetry on Business Failure
An article about the effect of information asymmetry on business There is a study that has been done on the effect of information asymmetry on businesses. The study found that when businesses are left with less correct information, then they are more prone to failure. This is because with less correct information, it can be difficult for businesses to make decisions that will improve their chances for success. Additionally, this can also lead to increases in costs and decreases in profits for the businesses involved.
The impacts of resource-based theories on corporate diversification: A review
An inquiry about the impact of resource-based theories on corporate diversification. have shown that the utilization of natural resources (NR) within the organization can carry a positive impact on the companys performance by increasing productivity and reducing costs. RBTs are often used to improve company performance through .. the assertion that resources, or those assets and minerals owned by an organization, can beemployed to alternatively generate profits or increased efficiency. It is through this lens that RBT dominates the thinking on Corporate Diversification in todays marketplace.
Diversifying Your Company's Capital Structure
A study about the effect of diversification on a company's performance found that it corresponds with a strategy that leads to growth, profitability and a strong capital structure to cover liabilities. The study found that diversification is essential for companies in order to achieve strategic relevance and spontaneous performance.
Diversifying Your Firms' Portfolios to Reduce Financial Risk
A journal about corporate diversification and its effect on firm found that it can reduce the risk of loss. By adding different asset classes to the firms portfolio, businesses can reduce their exposure to certain risks while maintaining a level of financial security. This can be done by ensuring that each investor has an equal share in the firm, and by imposing constraints on how much money individuals can invest in any one asset class. The study found that when firms establish diversification plans and invest in a range of assets, they are less likely to experience financial setbacks.
Incorporating multinationals into corporate portfolios: a case study on two companies
A study about the relationship between corporate portfolios and the multinational corporation was conducted. What was found is that different corporate portfolios can have an important impact on the multinational corporation. Many factors are considered such asconnectedness of companies within a multinational organization, their competedirectivity via products and services, capacities of their employees and presence in other industries.
The Role of Diversification in the Economy
A study about diversification in three economic sectors - manufacturing, retail stores, and services - found that no single measure of diversification was appropriate for all three sectors. In manufacturing, widespread application of R&D methods was necessary to diversify against internal risks and global competition. However, in retail stores and services, limited investments were required to achieve stability and modest returns. Therefore, applying generalization to these two economic sectors would be inappropriate and may not berobust enough to detected institutional risk.