Diversification, Refocusing, and Economic Performance

Front Cover

During the 1980s a dramatic change in the evolution of the modern corporation took place. The phenomenon, which has been labelled "refocusing," "de-diversifying," "de-conglomerating," or simply "getting back to basics," has changed the terrain of American business. Diversification, Refocusing, and Economic Performance empirically examines the causes and consequences of this phenomenon from a corporate strategy perspective, uncovering the full scope and effects of corporate refocusing, its strategic logic, and the resultant managerial implications. Two key findings are that every firm has its own limit for diversification, beyond which profits will decline, and that there are certain similarities among those companies who choose to refocus. Starting right after the Second World War, many companies diversified widely, primarily in areas unrelated to their core businesses. In the 1980s, however, as corporate acquisitions and hostile takeovers ran rampant, this trend toward diversification and conglomeration began to reverse. Today, there is ample evidence that corporate managers are responding in significant numbers to takeover threats by shedding unlucrative divisions and subsidiaries and concentrating on boosting the core product lines that have been their company's bread-and-butter. Drawing on a data set of 250 of the top Fortune 500 companies, Constantinos Markides measures the extent of the refocusing phenomenon, proposes reasons for its current popularity, delineates the characteristics of firms that are refocusing, and discusses the effects of refocusing on company market value, profitability, and organizational structure.

 

What people are saying - Write a review

We haven't found any reviews in the usual places.

Contents

Diversification XInefficiencies and the Optimum Size of
11
Research Design
37
The Contours of Refocusing Activity
47
The Characteristics of Refocusing Firms
67
Ex ante
81
Ex post Evidence
109
Organization Structure Refocusing and Profitability
135
Summary and Future Research
163
Bibliography
177
Copyright

Common terms and phrases

About the author (1995)

Constantinos C. Markides is Associate Professor of Strategic and International Management at London Business School.

Bibliographic information