Be Careful with Benefits of Diversification - Misconceptions and Generalizations

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Stefka Nenkova, Student (University), Netherlands
WHY DIVERSIFY According to Reel and Luffman (1986) the reason behind diversification lies within the benefits connected to a broader product-market base. However, they also point out that before being lured by the benefits from implementing such strategy, one should carefully consider the problems surrounding it. Precautions are necessary, because problems that present no threat to one organization could easily destroy another one. Reed and Luffman (1986) argue that there is no single simple solution to such problems, and they try to dissolve the generalizations concerning the topic of diversification that are made when people are trying to find such a "golden egg". DIVERSIFICATION ACCORDING TO ANSOFF Ansoff (1965) distinguished horizontal diversification, concentric diversification and conglomerate diversification. Even if he named his matrices “Growth vectors in diversification”, his point - of GROWTH being the main objective of diversification - is sometimes disregarded. The la (...) Read more? Sign up for free

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