Explain business diversification
When a company diversifies, they simply add extra products or services to their business. For example, if Company A opens a new branch or location, that is not diversifying. Something such as adding a Mexican food selection on the menu could be considered diversifying. Single and dominant corporate-level strategies are two ways that companies are diversified. However, when a firm is attempting to reach a low level of diversification, it would be best for them to pursue either a single business diversification level or a dominant business diversification strategy.
According to Hitt (2017, p. 168), “A corporate-level specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.” Therefore, corporate level strategy is one where the firm’s actions are on a company-wide change. This is done to get more of a competitive advantage by choosing certain groups within the company and having them compete in different product markets. A single business diversification strategy is used when the firm brings in 95 perfect or more of the revenue. A dominant business diversification strategy is best used when a firm only brings in 70 percent to 95 percent of the revenue. Single strategy would be best if Company A added the Mexican food selections and that by itself brought in 95% or more of the revenue. An example of this may be seen in a Verizon store. Verizon sells phones, tablets, and protective cases for electronic devices. If the cases were bringing in 95% or more of the revenue, a single business strategy would be best. However, if both the cases and tablets were bringing in money, it would be considered a dominant business strategy.
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