When diversified business creates competitive advantage « ZHU+RICH

Editorial Comment:  Diversification by acquisition is the fastest and most efficient way to diversify your income stream.  Happy to talk to business owners looking for a strategy to balance revenues and profit fluctuations due to seasonality, economic factors, etc..

Diversification has been a major component of the widening scope of the modern corporation during the twentieth century. The expansion of companies into different product markets has been a major source of corporate growth in all the advanced industrial nations. The peak of the diversification boom saw the emergence of a new corporate form: the conglomerate.

These highly diversified enterprises were created from multiple, unrelated acquisitions. Their existence reflected the view that senior management no longer needed industry-specific experience, but needed to deploy the new techniques of financial and strategic management.

Later on, the diversification trend went into sharp reverse. Unprofitable “noncore” businesses were divested. Acquisition activity was then extremely heavy, but unlike the previous decade, it was characterized by refocusing, of which the primary driver was the reordering of corporate goals from growth to profitability. As the business environment became more volatile, specialized companies resulted more agile than large diversified corporations. At the same time, external markets for resources became increasingly efficient. Many diversified companies spun off their growth businesses because of the greater potential of external capital markets to fund their development.

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When diversified business creates competitive advantage « ZHU+RICH:

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