Corporate diversification, strategic planning and performance in large multiproduct firms

Abstract

This study explores the relationship between corporate diversification and strategic planning in large multiproduct firms by focusing on the strategic, organizational and performance characteristics associated with each avenue to diversification. High levels of horizontal sharing among Strategic Business Units (SBUs), together with a sophisticated planning system that embodies a long-term orientation, are associated with markedly higher measures of financial performance and revenues derived from new products. However, firms attempting to pursue horizontal sharing among SBUs with a strong external acquisition orientation evinced lower levels of performance. In addition, diversification based on portfolio management is linked to a high proportion of revenues derived from mature products and markets. Implications for integrating strategic market planning with corporate planning activities are discussed, especially as they relate to building shared marketing and other functional programs among SBUs.