Diversified Company

AAA

DEFINITION of 'Diversified Company'

A company that has multiple, unrelated businesses. Unrelated businesses are those which (1) require unique management expertise, (2) have different end customers and (3) produce different products or provide different services. One of the benefits of being a diversified company is that it buffers a company from dramatic fluctuations in any one industry sector. However, this model is also less likely to enable stockholders to realize significant gains or losses because it is not singularly focused on one business.

INVESTOPEDIA EXPLAINS 'Diversified Company'

Companies may become diversified by entering into new businesses on its own, by merging with another company or by acquiring a company operating in another field or service sector. One of the challenges facing diversified companies is the need to maintain a strong strategic focus to produce solid financial returns for shareholders instead of diluting corporate value through ill-conceived acquisitions or expansions.

Some of the most well-known American diversified companies are GE, 3M, Sara Lee and Motorola. European diversified companies include Siemens and Bayer; Asian diversified companies include Hitachi, Toshiba, and Sanyo Electric.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  3. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  4. Merger

    The combining of two or more companies, generally by offering ...
  5. Parent Company

    A company that controls other companies by owning an influential ...
  6. Mergers And Acquisitions - M&A

    A general term used to refer to the consolidation of companies. ...
RELATED FAQS
  1. How can a company reduce the unsystematic risk of its own security issues?

    Companies can reduce the unsystematic risk of their own security issues simply by doing the most effective job possible of ... Read Full Answer >>
  2. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  3. How is the marginal cost of production used to find an optimum production level?

    The marginal cost of production can be tracked to show the optimal production level where per-unit production cost is lowest ... Read Full Answer >>
  4. What factors make it difficult to compare performance ratios between retail stocks?

    Companies that operate in the retail sector significantly differ in terms of their profitability and efficiency, making stock ... Read Full Answer >>
  5. How do investors interpret the same store sales ratio when analyzing food and beverage ...

    When an investor interprets the same-store sales ratio in analyzing food and beverage stocks, he looks at the monthly same-store ... Read Full Answer >>
  6. What is the average return on equity for a company in the retail sector?

    The retail sector includes automotive; building supply; distributors; general; grocery and food; online; and special lines ... Read Full Answer >>
Related Articles
  1. Insurance

    Evaluating The Board Of Directors

    Corporate structure can tell you a lot about a company's potential. Learn more here.
  2. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  3. Bonds & Fixed Income

    Evaluating A Company's Capital Structure

    Learn to use the composition of debt and equity to evaluate balance sheet strength.
  4. Bonds & Fixed Income

    Cashing In On Corporate Restructuring

    Companies use M&As and spinoffs to boost profits - learn how you can do the same.
  5. Fundamental Analysis

    Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  6. Investing Basics

    The Flow Of Company Information

    Learn how to gather all the pieces before you start to put together your puzzle.
  7. Fundamental Analysis

    The Financial Characteristics Of A Successful Company

    There are many factors that contribute to a profitable business. Find out what they are here.
  8. Active Trading Fundamentals

    Evaluating A Company's Management

    Financial statements don't tell you everything about a company's health. Investigate the management behind the numbers!
  9. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  10. Options & Futures

    All About EVA

    Looking for a formula to determine whether a company is creating wealth? Time to learn all about economic value added.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!