Sir Mark Weinberg discusses the wisdom, or lack thereof, in firms that diversify their portfolio of businesses. Having been a director of a firm (British American Tobacco) that implemented an unrelated diversification strategy to reduce risk in the company’s core business units, Sir Weinberg has keen insights into the wisdom of this strategy.
Before you watch the video consider the following concepts and questions and be prepared to discuss them in class:
• Concepts 

• Executive hubris 

• Diversification 

• Risk 

• Unrelated acquisition 

• Core competency 

Questions

1. Think about firms that implement an unrelated diversification strategy. Why are some firms able to implement this corporate level strategy effectively while others struggle?
2. Read the history of British American Tobacco since 1969 from the company’s Web site. What impressions do you take away from this?
3. British American Tobacco utilized the concept of risk minimization as a reason for diversification away from its core business.
Do you consider this to be a valid rationale for implementing an unrelated diversification strategy?
4. How do public equity markets value unrelated diversification strategies and why do you think they do so?