CHAPTER 8: CORPORATE STRATEGY: DIVERSIFICATION AND THE MULTIBUSINESS COMPANY

Diversification means more than one industry is involve in a business and then, the business that makes a joint venture with another business can reduce their cost. Later, a move to diversify into a new business must be pass three tests which are industry attractiveness test that offer an opportunity for profits, second, cost of enter the target industry must not be so high and lastly is better-off test or synergy that means, more than strong or provide the best for company. Although, the businesses can be diversify into three types which are related business, unrelated business and both of related and unrelated business. The value chain is the measure whether the business is related or unrelated business. Finally, diversified company can choose their strategy option, whether it broader the diversification base, narrow diversification base and restructure the company’s business lineup or multinational diversification.