Title: The influence of the diversification degree and directivity on business risk

Authors: Ryota Ishiai; Ling Feng; Masahiro Irie

Addresses: Production Control Department, Industrial Engineering Sec., Izumo Murata Manufacturing Co., Ltd., Hikawachokaminaoe2501-1 Izumo, Shimane 699-0624, Japan ' Faculty of Science and Technology, Tokyo University of Science, 2641 Yamasaki, Noda, Chiba 278-8510, Japan ' Faculty of Science and Technology, Tokyo University of Science, 2641 Yamasaki, Noda, Chiba 278-8510, Japan

Abstract: One of main purposes of diversification strategy is to decrease the business risk by portfolio construction. In this case, since the unrelated diversification strategy differs in the performance variation pattern between business segments greatly, we think that business risk will be decreasing. We find that when RHI (an index of the degree of diversification) is less than 0.3, Dir (an index of the directivity of diversification we proposed) and business risk is in positive correlation. That is, when the degree of diversification is low, unrelated diversification will be effective in decreasing a business risk.

Keywords: business risk; degree of diversification; directivity of diversification; diversification strategy.

DOI: 10.1504/AJMSA.2016.10001368

Asian Journal of Management Science and Applications, 2016 Vol.2 No.3, pp.273 - 295

Received: 14 Dec 2015
Accepted: 17 Feb 2016

Published online: 25 Nov 2016 *

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