Diversification as a Corporate Strategy Essay Example | Topics and Well Written Essays - 2000 words

Diversification as a Corporate Strategy - Essay Example It is important to note that the business environment of every industry varies. This explains why many business leaders may not be able to cope with the varying requirements of different business sectors. The firms that get involved in the diversification strategy often look only at the positive aspects of the strategic alternative. However, there are other prominent disadvantages that accompany the process of diversification. Despite the many hardships and appalling rates of failure, the diversification strategy remains the preferred alternative for many organizations, usually for behavioral rather than economic reasons. When one places diversification on a broader perspective, it becomes clear that a concept is fundamentally a negative option. Indeed, many business scholars have expressed that companies that result to diversification are, more often than not, running away from better alternatives. This assertion stems from the fact that many firms actually delve into diversificatio n with the hope of finding better prospects on the other side, without conducting due diligence on the actual benefits that diversification brings to the company. During the process of diversification, there are three main approaches that companies adopt in expanding their operations. These include; networks, acquisitions, and internal development. Networks have been seen as playing a pivotal role in streamlining the operations of international businesses. There are numerous definitional problems that have been linked to the idea of networks.