Enterprise Strategy:

Sustainable Growth

Diversification Strategies

Creating Additional Value Through Synergetic Integration of a New Business Into the Existing One


Vadim Kotelnikov

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Creating Sustainable Profits: 9 Questions To Answer

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Two Types of Diversification


Three Forms of Diversification

  • Vertical Integration integrating business along your value chain, both upstream and downstream, so that one efficiently feeds the other

  • Horizontal Diversification moving into more than one industry; the new business usually somehow relates to the existing one, although a few conglomerates instead pursue a strategy of unrelated diversification

  • Geographical Diversification moving into new geographical area to overcome limited growth opportunities in the local market and/or to gain global leadership positions

Means of Diversification

Do It Yourself

Do It with Others

Diversification Success Stories

Market Segmentation by e-Coach    eCoach-Cimcoin Synergy

Thermo Electron's Spinout Strategy

Venture Acquisitions by Google

Why Diversification?

The two principal objectives of diversification are

  1. improving core process execution, and/or

  2. enhancing a business unit's structural position.

The fundamental role of diversification is for business architects to create value for stockholders in ways stockholders cannot do better for themselves1. The additional value is created through synergistic integration of a new business into the existing one thereby increasing its competitive advantage >>>

Forms and Means of Diversification

Diversification typically takes one of three forms:

  1. Vertical integration along your value chain

  2. Horizontal diversification moving into new industry

  3. Geographical diversification open up new markets

Means of achieving diversification include internal development, acquisitions, strategic alliances, and joint ventures. As each route has its own set of issues, benefits, and limitations, various forms and means of diversification can be mixed and matched to create a range of options.

Capitalize on Your Core Competencies

Your company's core competencies things that you can do better than your competitors  can often be extended to products or markets beyond those in which they were originally developed. Such extensions represent excellent opportunities for diversification. Any core competence that meets the following three requirements provides a viable basis for your corporation to create or strengthen a new strategic business unit (SBU)2:

  1. The core competence must translate into a meaningful competitive advantage.

  2. The new business unit must have enough similarity to existing businesses to benefit from your corporation's core competencies.

  3. The bundle of competencies should be difficult for competition to imitate.


Success Stories Best Business Practices Business e-Coach

Invented in 2001, Ten3 Business e-Coach has customers all around the World and licensed trainers in 50+ countries. To create greater value for diverse groups of users, I have gradually built a synergistic network of diversified e-coaching sites. Each site focuses on a chosen set of life values and/or business interests.

Together with partners, we synergized e-Coach and Cimcoin to create further value for people and build an amazing an joyful e-world CimJoy... More




  1. 'Value-Creating Mergers: Fact or Folklore?', Michael Lubatkin

  2. Strategic Management, Alex Miller

  3. Every Business is a Growth Business, Ram Charan and Noel. M. Tichy