Diversification Strategy: when and why to diversify. The cases of EXOR and Chematek

Abstract

Strategy represents one of the vital building blocks for a business construction and its life cycle. It is necessary to implement a strategy that clearly defines the activities to be carried out and the objectives, to create the guiding principle for future operations. This dissertation focuses on the so called “corporate strategy” and its phases: identification, development, sectors to penetrate and objectives. The focus is the diversification strategy, now back in vogue, as a direct result of the unstable playground in which companies operate, but which has always been a topic of debate especially regarding its real effectiveness. Implementing a diversification strategy involves a high risk of execution and the limits of this method will be presented and analyzed. An in-depth study of a company strength is necessary, as well as a deep analysis of the sector in which it wants to penetrate. The various forms of diversification that a company can evaluate to implement its strategy, the relative strengths and weaknesses will be investigated. Finally, the presentation of two case studies: EXOR and Chematek. The first is the Agnelli’s holding company, emblematic example of well-performing diversification applied in a wide range of sectors. The second is a pharmaceutical company that, thanks to its management vision, successfully penetrated water and petrol sectors. We will go through the process that guaranteed these profitable outcomes, based on accounting results. Strategy represents one of the vital building blocks for a business construction and its life cycle. It is necessary to implement a strategy that clearly defines the activities to be carried out and the objectives, to create the guiding principle for future operations. This dissertation focuses on the so called “corporate strategy” and its phases: identification, development, sectors to penetrate and objectives. The focus is the diversification strategy, now back in vogue, as a direct result of the unstable playground in which companies operate, but which has always been a topic of debate especially regarding its real effectiveness. Implementing a diversification strategy involves a high risk of execution and the limits of this method will be presented and analyzed. An in-depth study of a company strength is necessary, as well as a deep analysis of the sector in which it wants to penetrate. The various forms of diversification that a company can evaluate to implement its strategy, the relative strengths and weaknesses will be investigated. Finally, the presentation of two case studies: EXOR and Chematek. The first is the Agnelli’s holding company, emblematic example of well-performing diversification applied in a wide range of sectors. The second is a pharmaceutical company that, thanks to its management vision, successfully penetrated water and petrol sectors. We will go through the process that guaranteed these profitable outcomes, based on accounting results.