MGT 409 Lecture Notes - Lecture 6: Vertical Integration, Mckesson Corporation, Shaw Industries
Document Summary
Diversification initiatives should create value for the stockholders: give access to different industries o. Provide opportunity to enter the optimal industries and segments. Businesses should be managed so as to create more value than they would on their own. Related vs un-related diversification - if you can leverage primary activities it is most likely related. Related businesses (horizontal & vertical relationships) o o o. Unrelated businesses (hierarchical relationships: value creation derives from corporate office o. Leveraging support activities: only share secondary activities. Leveraging core competencies 3m leverages its competencies in adhesives technologies in many industries, including automotive, construction, and telecommunications. Sharing activities - mckesson, a large distribution company, sells many product lines, such as pharmaceuticals and liquor, through its super-warehouses. Cost savings from leveraging core competencies or sharing related activities among businesses in the corporation. Three criteria (of core competencies) that lead to the creation of value and synergy. Core competencies must enhance competitive advantage(s) by creating superior customer value.
