Corporate Strategy: Diversification and Management of Multiple SBUs

Abstract

This chapter, integrating more in depth the issue of corporate strategy, i.e. the company’s presence in multiple businesses, briefly discussed in the first book of this series, addresses the various forms of diversification that can shape the development of that presence over time, their advantages and disadvantages, and their implications for management. Specifically, it describes the most relevant differences among the main configurations of diversification (vertical, horizontal, geographic, and unrelated), and addresses in particular, with the support of several conceptual and operational models, the issue of geographic differentiation, that is becoming more and more important for most companies, constrained by the stagnation of their domestic markets. Finally, through a description of a simplified business simulation, it attempts to show how companies could manage, in practice, one of the most relevant strategic problems, i.e. the selective allocation of scarce resources among and within different businesses.