Create an argument for diversification of your business that will be presented to the board of direc
Diversification won't prevent a loss, but it can reduce the impact of fraud and bad information on your portfolio.
Reasons for failure of diversification strategy
The issues the questions raise, and the discussion they provoke, are meant to be coupled with the detailed financial analysis typical of the diversification decision-making process. Once a company has identified its strategic assets, it can consider this second question. But according to Angelique Power and Sophia Shaw, the decision to diversify should be simple. Collis and Cynthia A. In addition, Xerox leased rather than sold its machines—a strategic choice that had worked well for the company in its earlier battles with IBM, Kodak, and 3M. Different Types of Risk Investors confront two main types of risk when investing. The more diverse the set of gardeners, in her view, the more resilient the organization. Laker went bankrupt in Why You Should Diversify Let's say you have a portfolio of only airline stocks. This risk is also known as unsystematic risk and is specific to a company, industry, market, economy, or country. If managers have cleared the hurdles that the preceding questions raise, they then need to ask whether the strategic assets they intend to export are indeed transportable to the new industry.
All is not necessarily lost if managers find that they lack a critical strategic asset. Of course, no company will intentionally diversify into an industry in which it will lose money. In order to boost diversity in nonprofit board membership, those criteria need to be amended to be more expansive.
The company had survived up to that point because its main strategic asset was in retailing and hospitality: it excelled at managing pubs.
There may be internal alliances or feuds, as well as varying degrees of comfort about expanding the makeup of the board itself. Systematic risk affects the market in its entirety, not just one particular investment vehicle or industry.
Markides is an associate professor of strategic and international management at London Business School.
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