ABSTRACT
The hierarchical distinction between business and corporate levels of strategy implicitly restricts corporate level strategic activities to corporate headquarters. However, a firm's corporate level strategy acts as both a catalyst for and a constraint on the strategies of its business units; and therefore also involves business level managers. The corporate office could decide to minimize its involvement and delegate most operational decisions to business units, making them as independent as possible; alternatively, it can play an important role in the business units' decision-making process to increase coordination across business units. These modern corporations applied administrative hierarchies and standardized decision-making, financial control, and information management systems. This chapter describes how the level of diversification of firms has evolved over time in response to the pressures of the firm's external as well as internal environments. It discusses the relationships among corporate level strategy, diversification, and firm performance.
