This document discusses corporate-level strategy and diversification. It defines corporate-level strategy as specifying actions to gain competitive advantage by selecting and managing different businesses. Diversification can occur at different levels from low to very high. Reasons for diversification include economies of scope, market power, financial economies, and external incentives like regulations. Firms can create value through related diversification using shared activities or transferred competencies, or unrelated diversification through efficient capital allocation or restructuring. However, overdiversification driven by managerial motives can reduce value. Low firm performance also provides an incentive to diversify.

1. CHAPTER 6 Strategy at the Corporate Level Management of Strategy Concepts and Cases

9. FIGURE 6.1 Levels and Types of Diversification Source: Adapted from R. P. Rumelt, 1974, Strategy, Structure and Economic Performance, Boston: Harvard Business School.

11. Value-Creating Strategies of Diversification High Low Operational and Corporate Relatedness Corporate Relatedness: Transferring Skills into Businesses through Corporate Headquarters Operational Relatedness: Sharing Activities between Businesses High Low Related Constrained Diversification Vertical Integration (Market Power) Unrelated Diversification (Financial Economies) Related Linked Diversification (Economies of Scope) Both Operational and Corporate Relatedness (Rare capability that creates diseconomies of scope)

12. FIGURE 6.2 Value-Creating Diversification Strategies: Operational and Corporate Relatedness

27. FIGURE 6.3 The Curvilinear Relationship between Diversification and Performance

31. FIGURE 6.4 Summary Model of the Relationship between Firm Performance and Diversification Source: R. E. Hoskisson & M. A. Hitt, 1990, Antecedents and performance outcomes of diversification: A review and critique of theoretical perspectives, Journal of Management, 16: 498.