Academic level – Undegraduate 1-2
Type of paper – Question/Answer
Topic Title – Diversification Strategies
Corporate-level strategy is used by firms to become more diversified and create additional value.
Single and dominant corporate-level strategies are paramount in defining a company’s competitive advantage and overall development trajectory. According to Hitt et al. (2017), a single corporate-level strategy refers to a diversification level where more than 95% of revenues come from a single well-developed business. Meanwhile, a dominant-business diversification strategy implies a single business that brings 70 to 95% of total revenue to a firm. Hitt et al. (2017) emphasize that organizations that focus on very few or one core business have better success chances because they have developed in these markets and can provide prominent customer services. Nevertheless, a single corporate-level strategy can benefit companies with limited resources so that they can focus only on one business. Dominant-business diversification is more suitable for bigger organizations that can properly allocate resources to succeed in several ventures (Le, 2019). Consequently, single and dominant corporate-level strategies both describe low levels of diversification but are more appropriate for different contexts.
Single or dominant strategies are more suitable than diversified strategies when an organization prioritizes lower risks and simple operations management. These business approaches imply fewer threats and managing challenges than more diversified strategies, allowing them to gain a significant competitive advantage (Hitt et al., 2017). Additionally, single and dominant strategies are more practical in situations with a clear advantage of one strategy over another. An organization can focus on pursuing one promising strategy to maximize the chances of success and mitigate potential risks by utilizing identified strengths. Hitt et al. (2017) provide several examples, such as UPS or family-owned businesses that are proficient in one domain and wisely use this advantage to succeed. Limited resources can also become a significant factor in choosing single or dominant strategies over diversified ones since diversification requires additional personnel, costs, and planning. Hence, single or dominant strategies are more favorable than diversified ones in terms of risk mitigation and simplification of processes.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2017). Strategic management: Concepts and cases: Competitiveness and globalization (12th ed.). Boston, MA: Cengage.
Le, H. (2019). Literature review on diversification strategy, enterprise core competence and enterprise performance. American Journal of Industrial and Business Management, 09(01), 91–108. https://doi.org/10.4236/ajibm.2019.91008