Corporations diversify by investing time and resources into new areas of business. As individuals, each of us makes choices about how to spend our time and energies. Typically, we could divide our time between school, work, family, sleep, and play. During high-stress work projects, we likely devote more of our time to work; when studying for final exams or a professional board exam (such as the CPA exam), we probably spend more time and effort in the “student learning” mode. This manner of dividing our time can be thought of as “personal diversification.” Just as companies can invest in related or unrelated activities, we make similar choices. While we attend college, we may choose to engage in social and leisure activities with campus colleagues, or we may focus on classwork at school and spend our “play time” with an entirely separate set of people. Using Exhibit 8.8 as a guide, list each of your major activity areas. Think of each of these as a business. (If you are literally“ all work and no play,” you are a single-business type of personal diversification.) Instead of revenues, estimate the percentage of time you spend per week in each activity. (Most people will be diversified, though some may be dominant perhaps in school or work.) To assess your degree of relatedness and Un-relatedness, consider the subject matter and community involved with each activity. For example, if you are studying ballet and working as an accountant, those would be largely unrelated activities (unless you are an accountant for a ballet company!).

Exhibit 8.8

1. What conclusions do you derive based on your personal diversification strategy?

2. Do you need to make adjustments to your portfolio of activities? Explain the reasons for your answer.

3. Let’s consider dynamics—has your level of diversification changed over time (say, over the last five years)? Looking toward the future, do you expect your level of diversification to change as you complete your degree? Why or why not? 

Transcribed Image Text:

Revenues from Primary Business >95% 70%-95% <70% Type of Diversification Single business Dominant business Related-linked Competencies (in products, services, technology or distribution) Unrelated diversification (conglomerate) Single business leverages its competencies. Related Diversification Related-constrained Businesses generally share competencies. Dominant and minor businesses share competencies. Some businesses share competencies. Businesses share few, if any, competencies. Examples Birkenstock Coca-Cola Facebook Harley-Davidson Nestlé UPS ExxonMobil Johnson & Johnson Nike Amazon Disney GE Samsung Berkshire Hathaway Yamaha Graphic 70%- 95% R >95% R 70% -70% <70% R