The primary reason a firm uses a corporate-level strategy to
become more diversified is to create additional value. Using
a single- or dominant-business corporate-level strategy may
be preferable to seeking a more diversified strategy, unless a
corporation can develop economies of scope or financial economies
between businesses, or unless it can obtain market
power through additional levels of diversification. Economies
of scope and market power are the main sources of value
creation when the firm diversifies by using a corporate-level
strategy with moderate to high levels of diversification.
• The corporate-level strategy of related diversification helps
the firm to create value by sharing activities or transferring
competencies between different businesses in the company’s
portfolio.
• Sharing activities usually involves sharing tangible resources
between businesses. Transferring core competencies involves
transferring core competencies developed in one business to
another business. It also may involve transferring competencies
between the corporate headquarter’s office and a business
unit.
• Sharing activities is usually associated with the related constrained
diversification corporate-level strategy. Activity sharing
is costly to implement and coordinate, may create unequal
benefits for the divisions involved in the sharing, and may lead
to fewer managerial risk-taking behaviors.
• Transferring core competencies is often associated with
related linked (or mixed related and unrelated) diversification