Creating added value for shareholders via diversification requires building a multi-business company where the whole is greater than the sum of its parts.

The biggest drawbacks to entering an industry by forming an internal start-up are the costs of overcoming entry barriers and the extra time it takes to build a strong and profitable competitive position.

Related businesses possess competitively valuable cross business value chain match-ups; unrelated businesses have dissimilar value chains, containing no competitively useful cross-business relationships.

Strategic fit exists when the value chains of different businesses present opportunities for cross-business resource transfer, lower costs through combining the performance of related value chain activities, cross-business use of a potent brand name, and cross-business collaboration to build new or stronger competitive capabilities.

Economies of scope are cost reductions that flow from operating in multiple businesses; such economies stem directly from strategic fit efficiencies along the value chains of related businesses.

Diversifying into related businesses where competitively valuable strategic fit benefits can be captured puts sister businesses in position to perform better financially as part of the same company than they could have performed as independent enterprises, thus providing a clear avenue for boosting shareholder value.

The two biggest drawbacks to unrelated diversification are the difficulties of competently managing many different businesses and being without the added source of competitive advantage that cross-business strategic fit provides.

Relying solely on the expertise of corporate executives to wisely manage a set of unrelated businesses is a much weaker foundation for enhancing shareholder value than is a strategy of related diversification where corporate performance can be boosted by competitively valuable cross-business strategic fits.

Using relative market share to measure competitive strength is analytically superior to using straight-percentage market share.

A company's related diversification strategy derives its power in large part from the presence of competitively valuable strategic fits among its businesses.

The greater the value of cross-business strategic fits in enhancing a company's performance in the marketplace or on the bottom line, the more competitively powerful is its strategy of related diversification.

Sister businesses possess resource fit when they add to a company's overall resource strengths and when a company has adequate resources to support their requirements.

A cash hog generates cash flows that are too small to fully fund its operations and growth; a cash hog requires cash infusions to provide additional working capital and finance new capital investment.

A cash cow generates cash flows over and above its internal requirements, thus providing a corporate parent with funds for investing in cash hogs, financing new acquisitions, or paying dividends.

Focusing corporate resources on a few core and mostly related businesses avoids the mistake of diversifying so broadly that resources and management attention are stretched too thin.

Diversified companies need to divest low-performing businesses or businesses that do not fit in order to concentrate on expanding existing businesses and entering new ones where opportunities are more promising.

Restructuring involves divesting some businesses and acquiring others so as to put a whole new face on the company's business lineup.

A strategy of multinational diversification has more built-in potential for competitive advantage than any other diversification strategy.

Although cross-subsidization is a potent competitive weapon, it must be used sparingly to prevent eroding a DMNC's overall profitability.