Should a family firm pursue a highly related diversification strategy or a somewhat less related diversification strategy?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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A family firm is generally a small concern.  For this reason, it is probably better for it to pursue a highly related strategy.

A highly related diversification strategy is one in which the firm does not stray far from its core competency.  In such a strategy, the firm diversifies by making, for example, something that can be used with its main product.  This is a better choice for a small firm because it may not have the personnel needed to handle a diversification into an area that it knows nothing about.  It is better off staying in an area of the market in which it has a great deal of experience and knowledge.

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