B A 405 Lecture Notes - Lecture 14: Capital Market, Boston Consulting Group
11 Nov 2020
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Document Summary
Involves diversifying into businesses based on the value of general management competencies and/or an internal capital market. Unrelated diversification does not involve a unifying strategic theme, strategic fit, or meaningful value chain linkages across businesses. Firms pursuing unrelated diversification are often referred to as conglomerates. Always question it based on general management competencies. General management competencies - leadership, governance, organizational design, entrepreneurial culture across unrelated business. Internal capital market - we see value where the external market does not so it makes sense for us to invest even if they are unrelated to our business portfolio. Financial resources can be directed to those industries offering best profit prospects. Hard times in one industry may be offset by good times in another. Acquiring bargain-priced firms with big profit potential can enhance shareholder value. H2h competition with powerful rivals can be avoided. Size to match rivals in terms of efficiency and scale.
