Explain potential benefits that can be gained from vertical (or hierarchical) relationships when corporations use unrelated diversification to increase value.
What will be an ideal response?
Feedback: Potential benefits can be gained from vertical (or hierarchical) relationships-the creation of synergies from the interaction of the corporate office with the individual business units. There are two main sources of such synergies. First, the corporate office can contribute to parenting and restructuring of (often acquired) businesses. Second, the corporate office can add value by viewing the entire corporation as a family or portfolio of businesses and allocating resources to optimize corporate goals of profitability, cash flow, and growth. Additionally, the corporate office enhances value by establishing appropriate human resource practices and financial controls for each of its business units.
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