(SHORT
NOTES FROM STRATEGY TOOLS:
Organization
Design at http://www.mindtools.com)
A company is usually successful because
it does a small number of things really well. Sometimes, however, those things can only take
them so far, and to grow further, they must develop new capabilities. Rather than grow from within, form a joint
venture, or enter into a merger, alliances are often easier and less risky
alternatives to achieve your goals. A
strategic alliance is not the same as a merger, takeover, or acquisition.
Corporations use diversification as a
risk-reduction strategy. Diversification
can also introduce significant new risk, because it can take a corporation away
from its core competences. Diversification
means bringing together a collection of investments or business units in such a
way that overall losses are limited if a particular industry, area or business
experiences hard times. Diversification
refers to a company entering into a line of business that's outside the
business area in which it currently operates.
Companies are like living beings:
they're born, they grow, they enter a prime state, and then, eventually, they
go into decline.
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