Corporate controls, geographic dispersion, and their effect on corporate financial performance in related diversified corporations

2017 ◽  
Vol 10 (1) ◽  
pp. 102-117 ◽  
Author(s):  
Pouya Seifzadeh
Keyword(s):  
Corporate Strategy ◽  
Corporate Diversification ◽  
Control Mechanisms ◽  
Geographic Diversification ◽  
Content Type ◽  
Geographic Dispersion ◽  
Positive Effects ◽  
Unrelated Diversification ◽  
Related Diversification ◽  
Overall Performance

Purpose Drawing on the literature on corporate diversification, the purpose of this paper is to shed light onto the influence of geographic dispersion on the effectiveness of control mechanisms in related diversified corporations. This research contends that control mechanisms implemented by corporations and the extent of geographic diversification play a role in the synergies expected from related diversification being realized. Design/methodology/approach This study uses OLS regression to analyze data collected through surveys from managers of 193 Iranian corporations and their 2,704 subsidiaries to examine the relationship between relatedness, corporate performance, geographic dispersion, and emphasis of strategic controls. Findings The author finds that a triple interaction effect between corporate strategy (diversification approach), controls mechanisms, and the extent of geographic diversification influences the overall performance of corporations. Findings of this research suggest that the positive effects of strategic controls in related diversified corporations are most when there is less geographic dispersion and will attenuate as corporations become more geographically disperse. Research limitations/implications The findings of this research, have contributed to the extant literature in several ways. First, the findings further establish the superiority of related diversification to unrelated diversification in achieving economic performance in corporations. The findings reveal that, ceteris paribus, the more relatedness between activities of subsidiaries in corporations exists, higher performance can be expected at the corporate level. Second, the findings show once more that to achieve the higher performance that results from synergies in related diversified corporations, emphasis of strategic controls play a crucial and important role. Third, the author find that although the emphasis of strategic controls in essential to realizing the potentials in related diversified corporations, greater geographic dispersion attenuates the positive effects expected from stricter enforcement of strategic control mechanisms. Practical implications An important consequence of findings of this research is that managers should be more aware of the implications of selecting the geographic location of the subsidiaries that they either acquire or establish. While the literature focusing on corporate diversification has mainly focused on the differences between related and unrelated diversification, this paper brings a new factor into light. Therefore, the findings of this research provide the author with a better understanding of the factors that define success or failure in achieving financial objectives of corporations. Originality/value There has been very little done to investigate the factors that influence effectiveness of strategic controls in related diversified corporation. Much of this shortcoming has resulted due to difficulties in measurement of strategic controls their operationalization in empirical studies. This study has taken a step to that direction and therefore, provides a more coherent and clear picture of the factors that influence the overall performance in corporations.

scholarly journals Product diversification and large construction firm productivity: the effect of institutional environments in Malaysia

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohd Azrai Azman ◽  
Carol K.H. Hon ◽  
Bo Xia ◽  
Boon L. Lee ◽  
Martin Skitmore
Keyword(s):  
Firm Performance ◽  
Positive Impact ◽  
Product Diversification ◽  
Content Type ◽  
Construction Firms ◽  
Unrelated Diversification ◽  
Construction Firm ◽  
Related Diversification ◽  
Generalised Method Of Moments ◽  
The Impact

PurposeMany large construction firms (LCFs) adopt product diversification (PD) to counter downturns and spread risks. However, no detailed information is available concerning the type of PD that improves their performance. In addition, it is still uncertain how much changes in institutional dimensions influence the effectiveness of PD. Therefore, the aim is to resolve this issue by establishing a model that shows the extent of this influence.Design/methodology/approachThe generalised method of moments (GMM) estimator is used to model the PD strategies of 86 LCFs in Malaysia over 14 years (2003–2016) and its impact on productivity and profitability performance.FindingsUnrelated diversification (UD) decreased firm performance in 2003–2016, while related diversification (RD) had a positive impact during the more liberal 2010–2016 phase. The models show that the impact of PD is highly dependent on changes in institutional dimensions.Practical implicationsFirstly, managers may adjust the type of PD and its level of diversification to improve firm performance. Secondly, they may devise PD strategies based on changes in institutional dimensions to maximise their effectiveness.Originality/valueThe study contributes to the literature by determining the optimal amount of PD (including RD and UD) and its impact on performance. Secondly, the study is the first to investigate the moderating relationship of the institutional dimensions of economic and regulatory institutions on PD-firm performance. Thirdly, the study is the first to explore the components of technical-scale-scope economies (movement towards and around the production frontier), this being crucial to the strategy that was only conjectured in previous studies.

Corporate or Product Diversification

2017 ◽  
Author(s):  
Margarethe F. Wiersema ◽  
Joseph B. Beck
Keyword(s):  
Distribution Channels ◽  
Shareholder Wealth ◽  
Product Diversification ◽  
Strategic Decision ◽  
Business Trend ◽  
Corporate Diversification ◽  
Diversification Strategy ◽  
Unrelated Diversification ◽  
Strategic Assets ◽  
Related Diversification

Corporate or product diversification represents a strategic decision. Specifically, it addresses the strategic question regarding in which businesses the firm will compete. A single-business company that expands its strategic scope by adding new businesses becomes a diversified, multibusiness company. The means by which a company expands its strategic scope is by acquiring businesses, investing in the development of new businesses, or both. Similarly, an already diversified firm can reduce its strategic scope by divesting from or closing businesses. There are two fundamentally different types of corporate diversification strategy, depending on the interrelatedness of the businesses in the company’s portfolio: related diversification and unrelated diversification. Related diversification occurs when the businesses in the company’s portfolio share strategic assets or resources, such as technology, a brand name, or distribution channels. Unrelated diversification occurs when a company’s businesses do not share strategic assets or resources and do not have interrelationships of strategic importance. Companies can pursue both types of diversification simultaneously, and thus have a portfolio of businesses both related and unrelated. In addition to variations in the type of diversification, companies can vary in the extent of their diversification, ranging from business portfolios with very limited diversification to highly diversified portfolios. Decisions regarding the diversification strategy of a firm represent major strategic scope decisions since they impact the markets and industries in which the company will compete. Companies can increase or reduce their level of diversification for a variety of reasons. Economic motives, for example, include the pursuit of economies of multiproduct scale and scope, whereby per-unit costs may be lowered through the increase in sales volume or other fixed-cost reducing benefits associated with growth through diversification. In addition, companies may diversify for strategic reasons, such as enhancement of capabilities or superior competitive positioning through entry into new product markets. Similarly, economic and strategic reasons can motivate the firm to refocus and reduce its level of diversification when the strategic and economic rationales for being in a particular business are no longer justified. The performance consequences of corporate diversification can vary, depending on both the extent of the firm’s diversification and the type of diversification. In general, research indicates that high levels of diversification are value-destroying due to the integrative and complexity-associated costs that administering an extremely diversified portfolio imposes on management. Nevertheless, related diversification, where the company shares underlying resources across its business portfolio (e.g., brand, technology, and distribution channels), can lead to higher levels of performance than can unrelated diversification, due to the potential for enhanced profitability from leveraging shared resources. Corporate diversification was a major U.S. business trend in the 1960s. During the 1980s, however, pressure from the capital market for shareholder wealth maximization led to the adoption of strategies whereby many companies refocused their business portfolios and thus reduced their levels of corporate diversification by divesting unrelated businesses in order to concentrate on their predominant or core business.

Beyond artificial intelligence: why companies need to go the extra step

2020 ◽  
Vol 41 (1) ◽  
pp. 19-26 ◽  
Author(s):  
Ulrich Lichtenthaler
Keyword(s):  
Artificial Intelligence ◽  
Design Methodology ◽  
Corporate Strategy ◽  
Cost Savings ◽  
Human Intelligence ◽  
Content Type ◽  
Positive Effects ◽  
Extra Step ◽  
Conceptual Paper ◽  
Advanced Analytics

Purpose The purpose of this paper is to underscore the need for developing a meta-intelligence in companies based on a conceptual framework for combining artificial and human intelligence. Design/methodology/approach This is a conceptual paper, which draws on the insights from extant theoretical and empirical research. Findings In light of a growing trend towards artificial intelligence (AI), most companies face substantial difficulties, which often derive from an excessive emphasis on merely replacing human intelligence by means of AI. To capture the complementary benefits of artificial and human intelligence beyond mere cost savings, firms do not only need to enhance their advanced analytics while continuing to develop their human intelligence. Rather, they additionally need a meta-intelligence for transforming their intelligence architecture in line with corporate strategy. Consequently, the firms need intelligence3 – comprising AI, human intelligence and the meta-intelligence. Originality/value The new concept of a meta-intelligence for renewing and recombining artificial and human intelligence helps to reconcile diverse findings in prior research. Without this meta-intelligence, most AI initiatives will be isolated endeavors, which may have positive effects but likely will not live up to the expectations.

The Premium Industries Group Dubai

2011 ◽  
Vol 1 (1) ◽  
pp. 1-2
Author(s):  
Swapna Koshy
Keyword(s):  
Corporate Strategy ◽  
External Environment ◽  
Subject Area ◽  
Growth Strategy ◽  
First Year ◽  
Content Type ◽  
Corporate Strategies ◽  
Unrelated Diversification ◽  
Business And Management ◽  
Strategy Diversification

Subject area Corporate strategy, growth strategy, diversification, integration, and external environment. Study level/applicability First year undergraduate Business and Management. Case overview The Premium Industries Group, started in Dubai, in 1997 by entrepreneur extraordinaire George Martin, had grown exponentially in a decade into a conglomerate comprising 17 companies. The group had succeeded in capitalising the meteoric growth of Dubai. However, the change in the economic scenario prompted George to evaluate the company's past growth strategy and consider if it was appropriate for the future. Expected learning outcomes This case can be used to teach growth strategy, related and unrelated diversification, vertical and horizontal integration and impact of the external environment on corporate strategies. Supplementary materials A teaching note is available on request.

Millennium Company Ltd: overcoming tough times

2014 ◽  
Vol 4 (5) ◽  
pp. 1-5
Author(s):  
Rajiv Gopalkrishna Divekar ◽  
Pradnya Vishwas Chitrao ◽  
Pravin Kumar Bhoyar
Keyword(s):  
Corporate Strategy ◽  
Manufacturing Sector ◽  
Development Program ◽  
Cost Savings ◽  
Subject Area ◽  
Process Efficiency ◽  
Control Mechanisms ◽  
Manufacturing Companies ◽  
Content Type ◽  
And Control

Subject area Strategic marketing, Downturn, Optimal utilisation of minimal resources, Consolidating profitability, Focus shift from features to benefits and cost savings. Study level/applicability Management students who have knowledge of basic concepts of management discipline to derive the maximum benefit and understand the applicability; budding entrepreneurs; middle- and senior-level executives in an executive development program; people running family-owned businesses. Case overview In 2008-2009, the Indian manufacturing sector was facing stiff competition from China on account of the latter's ability to provide cheap labour and handle large volumes. The 2008-2009 economic down turn saw consumers cut down on their requirements with manufacturing companies getting fewer orders. Manufacturing companies therefore adopted the principle of optimal utilisation of minimal resources. Millennium Company Ltd (MCL) also succeeded in overcoming the 2008-2009 downturns through a shift in focus during the recession of 2009 from achieving pure revenue to consolidating its profitability. MCL is probably the only company in the world to have extensive expertise in both steam and control instrumentation. The dual expertise allows them to engineer industry-specific systems that focus on energy efficiency and utilities management for sectors as diverse as textiles, food processing, paper, power and chemicals etc. The company shifted its attention from features to benefits, cost savings, and profitability. MCL trained its people as to what to talk to whom. Today, MCL is a leader in India in process efficiency and energy conservation through technology tie-ups and focused investments in manufacturing and research. Expected learning outcomes The purpose of this case is to enable student managers to evaluate effectiveness of corporate strategies; make the student managers understand the resources–businesses–systems framework and the need for focused connection between these three through appropriate coordination and control mechanisms for a corporate strategy to deliver value; encourage students to apply their knowledge of Turnkey Projects, BCG/Porters/SWOT/Mackensys Model; encourage the students to research and find out how other companies in this field fared and what were the strategies adopted by them to overcome the recession and compete with MCL in a highly competitive market like that of India; and encourage student managers to go on field visits with the institute's help to similar organisations within the same city and if possible get live projects. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email [email protected] to request teaching notes.

scholarly journals Corporate Diversification and Corporate Social Performance in Indonesia

ETIKONOMI ◽  
2019 ◽  
Vol 18 (2) ◽  
pp. 221-232
Author(s):  
Dina Patrisia ◽  
Shabbir Dastgir ◽  
A. Abror
Keyword(s):  
Corporate Social Performance ◽  
Social Performance ◽  
Emerging Countries ◽  
Corporate Diversification ◽  
Unrelated Diversification ◽  
Dependent Variables ◽  
Related Diversification ◽  
One Year ◽  
Corporate Social ◽  
The Relationship

The relationship between corporate diversification and corporate social performance (CSP) is under-investigated, especially in emerging countries. This study examines the relationship between corporate diversification and CSP in Indonesia setting. Occurrence disclosure analysis has been applied to measure CSP based on 80 indicators of the Global Report Initiative (GRI). This study used multiple regressions with one-year lag dependent variables as the data analysis. The results show that the related diversification is negatively and significantly related to CSP, while, the unrelated diversification reveals a positive relationship with CSP. Besides that, unrelated diversification more correlated to CSP rather than related diversification. Furthermore, international diversification has a positive and significant relationship with CSP. Therefore, this study found that corporate diversification is a significant antecedent of CSP.JEL Classification: L25, M14

Benefits or costs? The effects of diversification with cross-industry knowledge on corporate value under crisis situation

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zhi Li ◽  
Jiuchang Wei ◽  
Dora Vasileva Marinova ◽  
Jingjing Tian
Keyword(s):  
Tacit Knowledge ◽  
Firm Value ◽  
Corporate Diversification ◽  
Public Companies ◽  
Content Type ◽  
Corporate Transparency ◽  
Crisis Situation ◽  
Unrelated Diversification ◽  
Knowledge Barriers ◽  
Diversified Firms

Purpose This paper aims to explore the explanations of “information effect” and “agency effect” of corporate diversification with cross-industry knowledge under a crisis situation. Design/methodology/approach Based on an event study of 203 public companies’ crises in China between 2008 and 2018, the authors verify the information and agency effects of corporate diversification under a crisis situation by, respectively, examining the effects of interactions of corporate unrelated diversification with corporate transparency and knowledge deficiency attribution on the stock market’s responses to the crises. Findings It is found that corporate unrelated diversification serves as a buffer in protecting firm value while attribution of knowledge deficiency can be a burden. The buffering effect is stronger when the corporate transparency is higher but weaker when the crisis is attributed to be caused by corporate tacit knowledge deficiency. Practical implications Unrelated diversified firms should strengthen information communication with stakeholders so as to break down the stakeholders’ cross-industry knowledge barriers, and thus protect their own value at the crisis’ onset. Also, they can further buffer the loss by reducing stakeholders’ perceptions of the corporate tacit knowledge deficiency revealed in the crisis. Originality/value This study is the first to illustrate that the information and agency effects of corporate diversification strategy can be partially explained under a crisis situation, which provides meaningful insights about how firms can conduct knowledge management in their daily operations to deal better with corporate crises.

Exploring the relationship among servant leadership, intrinsic motivation and performance in an industrial sales setting

2016 ◽  
Vol 31 (2) ◽  
pp. 219-231 ◽  
Author(s):  
Belén Bande ◽  
Pilar Fernández-Ferrín ◽  
Concepción Varela-Neira ◽  
Carmen Otero-Neira
Keyword(s):  
Servant Leadership ◽  
Intrinsic Motivation ◽  
Adaptive Behaviors ◽  
Control Mechanisms ◽  
Evaluation Theory ◽  
Content Type ◽  
Cognitive Evaluation Theory ◽  
Positive Effects ◽  
Mediating Mechanisms ◽  
And Performance

Purpose – Although servant leadership (SL) improves the overall effectiveness of individuals and teams, it remains understudied. The aim of this paper is to provide insight into the mediating mechanisms through which perceived SL affects salespersons’ proactive and adaptive behaviors. Design/methodology/approach – Data were gathered from 145 industrial salespeople and their supervisors across a variety of businesses and sectors in Spain. Findings – SL enhances salespeople’s adaptivity and proactivity by positively affecting their self-efficacy and intrinsic motivation. Furthermore, SL directly shapes the development of adaptive behaviors among salespeople, although this direct influence is not significant when considering proactivity. Additionally, the use of outcome-based control mechanisms enhances the positive effects of SL on salespeople’s intrinsic motivation. Practical implications – The results demonstrate that sales managers can promote more proactive and adaptive behaviors among sales staff by recognizing the importance of service and their moral responsibilities to the success of their subordinates. Originality/value – Cognitive evaluation theory was used to examine the direct and indirect effects of perceived SL on two emergent change-oriented behaviors (adaptivity and proactivity) using a matched sample of industrial salespeople from a variety of industries, thus providing a basis for the generalization of results. Moreover, in analyzing the moderating effects of outcome control, the conditions under which SL is more or less effective were examined.

Firm capabilities and diversification: how mission matters

2010 ◽  
Vol 11 (4) ◽  
pp. 248-260 ◽  
Author(s):  
Mohammad Pakneiat ◽  
Monireh Panahi ◽  
Javad Noori
Keyword(s):  
Developing Countries ◽  
Mission Statement ◽  
Organizational Capabilities ◽  
Philosophical Approach ◽  
Content Type ◽  
Firm Diversification ◽  
Unrelated Diversification ◽  
Strategic Approach ◽  
Related Diversification ◽  
Context Specific

PurposeThe literature on large firms in developing countries proposes a link between types of capabilities and diversification pattern. It is argued that technological/organizational capabilities lead to related diversification, and by using contact/general capabilities firms (mostly in developing countries) are able to diversify into unrelated fields. However, in our case, despite the presence of contact/general capabilities, only related diversification is observed. Limitation of the scope of diversification does not allow them to invest in different lucrative businesses. Most successful firms in developing countries have diversified vastly.Design/methodology/approachTo determine out the reason for this behavior in this case, in‐depth interviews based on open‐ended semi‐structured questionnaire with key 12 decision‐makers were carried out. Each interview took about 90 minutes.FindingsThe case study showed that firms' approach to mission development is connected to firm diversification and capabilities. A mission developed based on a strategic approach leads to the development of technological/organizational capabilities, which make related diversification more likely. However, a mission developed based on a philosophical approach when added to firm contact/general capabilities encourages unrelated diversification.Research limitations/implicationsThe research takes for granted the role of national conditions (e.g. macroeconomic indexes) when it is argueed that the behavior of Khodro is expected to be similar to firms in other developing countries (or formerly developing countries, e.g. South Korea). The work presented here could be tested again in two or more firms in a similar environment.Practical implicationsThe paper's findings should help firms in developing countries to develop their mission statement in a way that allows them to grow faster via unrelated diversification. It also informs them about the limitations of a strategic approach to their mission that hinders them from leveraging their contact and general capabilities.Originality/valuePrevious research has not paid enough attention to managerial issues in firms in developing countries. Firms in developing countries need more context‐specific instructions to succeed.

scholarly journals In VitroActivity of Glucosinolates and Their Degradation Products against Brassica-Pathogenic Bacteria and Fungi

2014 ◽  
Vol 81 (1) ◽  
pp. 432-440 ◽  
Author(s):  
T. Sotelo ◽  
M. Lema ◽  
P. Soengas ◽  
M. E. Cartea ◽  
P. Velasco
Keyword(s):  
Pseudomonas Syringae ◽  
Xanthomonas Campestris ◽  
Pathogenic Bacteria ◽  
Degradation Products ◽  
Allyl Isothiocyanate ◽  
Leaf Extracts ◽  
Soil Pathogens ◽  
Content Type ◽  
Positive Effects

ABSTRACTGlucosinolates (GSLs) are secondary metabolites found inBrassicavegetables that confer on them resistance against pests and diseases. Both GSLs and glucosinolate hydrolysis products (GHPs) have shown positive effects in reducing soil pathogens. Information about theirin vitrobiocide effects is scarce, but previous studies have shown sinigrin GSLs and their associated allyl isothiocyanate (AITC) to be soil biocides. The objective of this work was to evaluate the biocide effects of 17 GSLs and GHPs and of leaf methanolic extracts of different GSL-enrichedBrassicacrops on suppressingin vitrogrowth of two bacterial (Xanthomonas campestrispv. campestris andPseudomonas syringaepv. maculicola) and two fungal (AlternariabrassicaeandSclerotiniascletoriorum)Brassicapathogens. GSLs, GHPs, and methanolic leaf extracts inhibited the development of the pathogens tested compared to the control, and the effect was dose dependent. Furthermore, the biocide effects of the different compounds studied were dependent on the species and race of the pathogen. These results indicate that GSLs and their GHPs, as well as extracts of differentBrassicaspecies, have potential to inhibit pathogen growth and offer new opportunities to study the use ofBrassicacrops in biofumigation for the control of multiple diseases.

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