Chapter 6: Corporate-Level Strategy 193resource interrelationships in production, marketing, procurement, and technology,
defined earlier as activity sharing. Interestingly, Dyson, which produces vacuum clean-
ers, has invested in battery technology. Dyson’s CEO, James Dyson, has indicated that
the company, besides producing a battery operated vacuum, “will launch 100 products
in four categories that are new to the company” using the new more efficient battery
technology.^109
Intangible resources are more flexible than tangible physical assets in facilitating
diversification. Although the sharing of tangible resources may induce diversification,
intangible resources such as tacit knowledge could encourage even more diversifica-
tion.^110 Service firms also pursue diversification strategies especially through greenfield
ventures (opening a new business for the firm without acquiring a previous established
brand-name business). Alvarez & Marsal, a professional service firm that has focused
on helping to restructure firms that experience financial distress, has diversified into
several additional service businesses. It has a reputation (an intangible asset) in New
York financial circles for its ability to do interim management for firms that are experi-
encing financial distress and often gone into bankruptcy. Alvarez & Marsal managed the
largest U.S. bankruptcy in history, the wind down of Lehman Bros. after it folded. As
part of this massive wind down, it needed to manage the treasury and cash assets of the
company in a way to realize the best returns possible for the remaining stakeholders and
creditors who held right to debt secured assets. Through its experience over a number
of bankruptcies, but in particular the Lehman Bros. bankruptcy, Alvarez & Marsal has
gained a reputation and ability in investment management especially for short-term
treasury deposits. These capabilities have lead the firm to open a new business to man-
age treasury and cash assets for other companies, but also for endowments and local and
state government entities. It also serves as a consultant for private equity firms which are
closely associated with firms in financial distress and restructuring strategies. From its
interim management business, it has moved into performance improvement consulting.
Through its reputation and skills in serving private equity clients, Alvarez and Marsal
also gained knowledge about investing in private equity businesses and have likewise
started a private equity fund.^111 This approach to diversification is not unfamiliar to other
professional service firms such as Bain Strategy Consulting, which also started Bain
Capital, a private equity fund through the support of Bain partners (owners) in their
consulting business.
Sometimes, however, the benefits expected from using resources to diversify the
firm for either value-creating or value-neutral reasons are not gained. Research suggests
that picking the right target firm partner is critical to acquisition success.^112 For example,
Sara Lee Corporation executives found that they could not realize synergy between
elements of their company’s diversified portfolio, and subsequently shed businesses
accounting for 40 percent of company revenue to focus on food and food-related prod-
ucts and more readily achieve synergy. Ultimately, Sara Lee split into two companies:
Hillshire Brands which focuses on meat and food products, and D.E. Master Blenders
1753, a beverage and bakery company. Incidentally, Hillshire Brands was purchased by
Tyson Foods in 2014 and Sara Lee no longer exists as a separate company, although the
brand is part of Tyson Foods.^113
6-6 Value-Reducing Diversification: Managerial Motives to Diversify
Managerial motives to diversify can exist independent of value-neutral reasons (i.e.,
incentives and resources) and value-creating reasons (e.g., economies of scope).