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profitable.
A diversified company needs two levels of strategy, which are competitive
up all the business unit parts, and make them work as a uniform unit.
Corporate strategy gives direction to the corporation when it comes to choose
what kind of business is profitable and how the business units should be
managed.
There are 4 main concepts of corporate strategy: portfolio management,
the attractiveness test, the cost-of-entry test, and the better-off test.
The portfolio management: we have that an individual investor, in order to
This strategy can meet the cost-of-entry test by finding an undervalued company.
Also, it can meet the better-off test by bringing a significant competitive
these companies.
Transferring skills: as mentioned before, in this kind of strategy, there is a more
interrelated relationship between the existing business and the acquired
corporation. This transferring of skills or expertise can only take place if the
different activities of the businesses involved are similar enough, so a
strategy and this one is that by sharing activities, the costs can be lowered and
therefore, the competitive advantage is enhanced. The sharing of activities will
only be beneficial to the corporations, if these activities bring competitive
The author fails to explain more in depth how more complex activities can be
Reference
Porter, M. E. (1987). From competitive advantage to corporate strategy. S.l.: Harvard
Bus Review Press.