Planning for Diversification through Merger

by J. Weston, Theodore Andersen, Frank Norton, H. Ansoff



The major purpose of this article is to describe a method for developing specific guidelines for planning diversification through merger. This is in contrast to much of the past writing on diversification which has dealt largely either with the effects of diversification and mergers on competition or how given firms solved their particular diversification problems. In order to limit the analysis to manageable proportions, this paper will discuss diversification planning only by manufacturing firms. The term, diversification, in this article means entry into new product lines involving design and production technologies and usually, types of markets, that are new to the diversifying company. This definition excludes diversification through market and product development activities already common among manufacturing firms. The article concerned solely with diversification through merger rather than through product development within the firm. Merger is often the preferred method of diversification because it provides quick entry and because it can supply what the diversifying firm may lack in the industry which it intends to enter.

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