The rationale behind and consequences of diversifying company operations
This thesis explores the factors that motivate and influence business leaders to diversify their companies' operations. Additionally, it investigates the results of these diversification efforts. This business case thesis consists of three sections: a case study, an instructor's manual, and a literature review. The case study tells the story of George P. Mitchell's desire to diversify his oil and gas company's operations by developing a master-planned community. The literature review analyzes scholarly literature related to the topic of diversification, discusses the similarities and differences among these articles, and concludes with the scholars' findings. Finally, the instructor's manual offers a guide on how professors can incorporate the information from the case and the literature review into their teaching plans. This guide features learning objectives and discussion questions that students who read both the case and the literature review should be able to answer. Furthermore, the instructor's manual provides an update on whether George P. Mitchell proceeded with developing the master-planned community and recounts the consequences of this decision. Because scholars relied on different metrics to conduct their studies, a general consensus on the subject of diversification does not exist. When considering factors that encourage or influence diversification, scholars examined the traits of leaders, firms, and management teams. With regard to diversification's impact on returns, some scholars found that diversification had negative effects, while others did not find a significant relationship between diversification and firm performance. Finally, unlike the scholars who studied the other subjects within diversification, scholars who studied the best strategies for diversification implementation agreed that acquiring firms should maintain tight controls on their acquired units.