During the Recent Financial Crisis, Diversified Companies Had a Measurable Financial Advantage; The Best Translated This Financial Edge Into Superior Performance and Recovered Faster From the Downturn, Says Report by The Boston Consulting Group and HHL - Leipzig Graduate School of Management
BOSTON, MA--(Marketwire - Jan 25, 2012) - The diversified company, long out of fashion and derided by commentators for lack of focus and lack of value, may in fact be the best business model for tough economic times, according to a new report by The Boston Consulting Group (BCG) and HHL - Leipzig Graduate School of Management. The report, entitled The Power of Diversified Companies During Crises, was released today and is available on www.bcgperspectives.com.
Diversified companies actually perform as well as focused companies and also have a measurable financial advantage, according to the report. More critically, top diversified companies turn this financial edge into a competitive advantage that enables them to outperform their peers and recover rapidly from crises. These findings are based on an analysis of more than 1,100 diversified and focused companies conducted jointly by BCG and HHL - Leipzig Graduate School of Management.
"Diversification is a compelling strategy -- it represents the time-tested idea that it's best not to put all your eggs in one basket," said Dieter Heuskel, a Düsseldorf-based senior partner at BCG and a coauthor of the report. "But in recent years, conventional wisdom has held that focus produces superior financial and operational performance, and the markets have agreed, penalizing diversified companies with the conglomerate discount. Our analysis shows that the discount has declined, and in many cases, it is unwarranted. The best diversified companies perform better for investors and operationally, and their business model is demonstrably more resilient in hard times."
Diversified Companies Had a Superior Risk Profile During the Financial Crisis
Financial Markets Have Begun to Recognize and Reward the Superior Financial Performance of Diversified Companies
The Top Diversified Companies Turned Their Financial Advantage into a Competitive Edge
How to Do It: These Four Lessons Show How the Top Diversified Companies Outperformed Their Peers
The top diversified performers set themselves apart by following four key strategies that take advantage of the greater stability that diversification provides. Other diversified companies can apply these lessons in order to become outperformers.
"There is strength in diversification -- and this study bears it out," said Harald Rubner, a Cologne-based senior partner at BCG and a coauthor of the report. "Focus has its advantages, but in hard times, the ability of a diversified company to pursue its strongest opportunities, while sustaining those that are temporarily weak, provides a lasting competitive advantage."
A copy of the report can be downloaded from www.bcgperspectives.com.
To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.
About The Boston Consulting Group
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Bcgperspectives.com is a new website that features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back almost 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed via PC, mobile, iPad, Facebook, Twitter, and LinkedIn.
About HHL
Founded in 1898, HHL - Leipzig Graduate School of Management was the first business school in Germany. Currently, HHL is one of the country's leading graduate schools, offering a variety of academic and executive programs for different graduate degrees, including MSc, MBA, and PhD. The Center for Corporate Transactions, headed by Prof. Dr. Bernhard Schwetzler, is HHL's major research unit in the field of mergers and acquisitions. It is designed to bring together scientists of HHL and its research partners working in the areas of corporate finance, accounting, law, and game theory to analyze and discuss problems in corporate transactions. For more information, please visit www.hhl.de.