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0:00
Hello and welcome to this series
of introductory talks
on business strategy.
My name is Robert Grant.
I'm a professor of
strategic management at
Bocconi University
in Milan, Italy.
I'm also the author of
"Contemporary Strategy Analysis",
a leading strategic
management textbook
used in business programs
throughout the world.
0:23
In this talk on
corporate strategy,
I'd like to address
the final dimension
of corporate scope,
diversification.
A firm's expansion from
one area of business
into another area of business.
Early in the 20th century,
even large businesses
were specialized into
a single area of business.
Steel, railroads, banking.
Many large companies
are now diversified
across several
industrial sectors.
Consider Amazon.
It began as an
online bookseller.
Now its online store offers
almost any conceivable
consumer product.
It also supplies
Cloud computing,
consumer electronics
and mobile devices
and streamed audio and
video entertainment.
In discussing
diversification with you,
my goals are, first,
for you to recognize
the different motives for
business diversification.
Second, be familiar with
the conditions under which
diversification can enhance
profitability in
shareholder value.
Third, to understand
the types and
sources of synergy
from diversification.
Finally, to distinguish
between different types of
relatedness amongst
the firm's businesses.
I should begin by considering
the reasons why firms diversify.
Then I'll consider the
conditions under which
diversification generates
profit and shareholder value.
Finally, I'll examine the
sources of synergy in
diversification and the
types of relatedness
amongst a firm's
different businesses.
However, let me
start by telling you
about a bicycle ride
I had last week.
Not far from home,
I got a puncture,
the question arose
should I fix it myself
or take it to the bicycle
shop and let them do it?
The shop charges are
about 30 bucks an hour,
a lot less than I can earn in
my consulting and
teaching activities.
Moreover, who would
do the job quicker?
No contest.
They were professionals,
so I took the bike to
the shop, paid them $50,
and didn't even get
my hands dirty.
