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A corporate-level strategy outlines the steps an organization will take to obtain a strategic advantage among others. For example, a company may choose a new strategic position to increase its sales and profits by using corporate-level strategies and diversification strategies to effectively approach the target market using techniques according to the audience’s characteristics. Low, moderate to high, and extremely high degrees of diversity are among the types and levels of diversification (Hitt et al., 2019).
Low-level diversification: Business strategies concentrated on a single or dominating business strategy. Additionally, businesses that use such techniques get most of their revenue from their primary markets (Seker, 2020; Hitt et al., 2019).
Single Business: A business generates 95% or more of all income.
Dominant Business: A single trade generates between 70% and 95% of total revenue.
Moderate to High Levels of Diversity: A company that seeks this level of diversification will use either a related limited or a related connected, corporate-level diversification approach (Seker, 2020; Hitt et al., 2019).
Related Constraint: All firms share the same product, technical, and distribution lineages, and less than 70% of income originates from the dominating business.
Related Linked: There are no typical ties between enterprises, and less than 70% of income originates from the dominating business.
Very High Levels of Diversification: the connections between enterprises are unfamiliar, and the income from the leading companies accounts for less than 70% of the total (Seker, 2020; Hitt et al., 2019).
Three factors influence a company’s decision to diversify its business:
Diversification that adds value: Value creation, which increases economies of scale, market power, and financial economies, enhances a company’s strategic competitiveness and value. These goals may be achieved through working together across businesses, diversifying to reduce competition, and ensuring the company’s long-term viability.
Diversification with no regard to value: In this case, the corporation may opt to diversify to perform better and offset the advantages of a potential rival.
Value-reducing diversification: The business might diversify to reduce managerial risks or boost executive remuneration.
Apple: The best illustration of a “related diversification” approach is Apple Inc., one of the world’s most well-known corporations. The business has expanded into electric vehicles, watches, tablets, and innovative audio. At the turn of 2000, Apple’s diversification strategy prevented the company from failing and aided in its expansion into one of the world’s largest organizations (Moorhouse, 2021).
Amazon: Amazon’s long-term goal has always been to transition from an e-commerce website to a full-fledged technological corporation. Amazon extended its offerings beyond web services and eCommerce to consumer items with the introduction of the Kindle e-reader and the Amazon Echo smart speaker system. Amazon’s strategic relatedness in corporate diversification is likely the most well-known and exceptional in terms of competitiveness (Moorhouse, 2021).
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2019). Strategic management: Concepts and cases: Competitiveness and globalization (13th ed.). Cengage.
Moorhouse, G. (Aug 9, 2021). Business Diversification Strategy – The Best Examples. Shorts
Seker, B. (Mar 9, 2020). Corporate-Level Strategy. Medium