Abstract

This article argues that unrelated diversification is consistent with a historical view of corporate development, that its acceptance by business is thoroughly documented and irreversible, and that companies are now entering a new era of rationalized diversity. The current phase is distinct from the initial drive to acquire. It emphasizes a restructuring by previously active diversifiers, including the selling of divisions that do not fit new images and strategies, and a realigning of the enterprise into major business arenas into which future acquisitions can fit. Historical perspective suggests that the current trend of unrelated diversification is part of the continuing evolution of business. Moreover, this phase of development has two primary components: the initial thrust into a number of new and unrelated businesses through acquisitions and subsequent rationalization of this acquired diversity, aided by divestments and organizational restructuring, into defined strategic areas for future development and growth. The rationalized phase of development is just now taking shape, evidenced by actions of companies like Esmark, RCA, and others. This type of change is assisted, if not prompted, by growing sophistication in planning systems and planners, new planning techniques, and the use of computer-assisted planning systems. An appreciation of corporate development and change can assist in shaping appropriate strategies for future evolution. After World War II, companies diversified resources into new businesses, often without the benefit of planning or an overall strategy, and sometimes with less than optimum results.