Paper Sample on Diversify Investment: Corporate Strategies for Risk Management

Paper Type:  Report
Pages:  3
Wordcount:  766 Words
Date:  2023-09-25

Diversification refers to a technique of allocating capital to multiple investment opportunities in the same line of business or a different business field to the existing market. It involves corporate business strategies that focus on the management of resources and the risks and returns within firms (Lopes, 2003). Large firms diversify their investment into multiple businesses that can either be related or not related to each other. In terms of business' relationships, diversification can either be grouped as either related or unrelated.

Trust banner

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Related diversification takes place when a firm expands its already established line of business or adds other companies related to its existing line of production. The firm may penetrate new markets for its range of activities. Under this type of diversification, the firm makes the consumption of its products easier by producing complementary commodities or services (Chatterjee & Wernerfelt, 1988). For example, a shoe manufacturing company may start another business dealing in leather accessories. Therefore it lies in the same line of production. In another instance, a traditional phone producing company may upgrade its business and therefore start manufacturing mobile phones. Related diversification strategy may take the form of the following activities:

  • New investment in the existing line of business involves similar products.
  • Companies are adopting a vertical integration in the business.

Marriott Corporation practices a related diversification strategy. The corporation diversifies its investment in the hospitality industry in multiple lines of production. Some of its investment activities include:

  • Different types of hotels.
  • Long-stay residential hotels.
  • Luxury resorts.
  • Time-share properties.
  • Airline catering.
  • Institutional food services.
  • Travel operations.
  • Franchise operations.
  • Credit card tie-ins.

Marriott Company invests in different types of hotels, long-stay residential hotels, luxury resorts, and time-share properties, revealing that it practices a related diversification strategy. All these types of businesses are categorized under the hospitality industry (Dzhandzhugazova et al., 2016). The company invests in other companies such as airline catering, institutional food services, and travel operations, which are related to the hospitality industry (Novak, 2017). The expansion of these product lines in the Marriott Corporation is therefore said to be connected.

Firms practicing related diversification enjoy several benefits. This type of diversification has a positive impact on the company's profit-making. Therefore, Marriott Corporation enjoys the benefits by spreading risks through the production of complementary services, such as luxury resorts and the long-stay residential hotels (Kang, 2011).

Unrelated diversification strategy, on the other hand, occurs when a firm adds new product lines or ventures in new markets, which are not related to the existing range of products. This type of diversification holds that any new investment opportunity that can be ventured into under favorable financial situations and has a high expected return on investment is suitable for diversification (Singh et al., 2003). For example, a shoe producing firm may invest in a cloth manufacturing company, which lies in a different line of production. In such a case, there is no direct link between the cloth manufacturing business and the existing line of production. In another instance, sales companies may venture into the construction market regardless of the difference between business activity and the current range of business. An unrelated diversification strategy attracts severe problems for enterprises.

The Marriott Corporation does not practice unrelated diversification in its businesses because most of its multiple lines of activities are related to each other and belong to the hospitality industry. The company ventures in several companies such as hotels, luxury resorts, and airline catering, which are all related to each other. Travel operations, institutional food services, and long-stay residential hotels are also associated with the existing line of the business, therefore showing a related diversification strategy.


In conclusion, franchised operations and credit card tie-ins are some of the businesses Marriot Corporation invests in. These businesses reveal unrelated diversification in business since they are not related to the hospitality industry.


Chatterjee, S., & Wernerfelt, B. (1988, August). Related or Unrelated Diversification: A Resource-Based Approach. In Academy of Management Proceedings (Vol. 1988, No. 1, pp. 7-11). Briarcliff Manor, NY 10510: Academy of Management

Dzhandzhugazova, E. A., Blinova, E. A., Orlova, L. N., & Romanova, M. M. (2016). Innovations in the hospitality industry. International Journal of Environmental and Science Education, 11(17), 10387-10400.

Kang, K. H. (2011). The moderating effect of product and brand diversification on the relationship between geographic diversification and firm performance in the hospitality industry. Temple University

Lopes, T. D. S. (2003). Diversification Strategies in the Global Drinks Industry.

Novak, P. (2017).What are the four segments of the hospitality industry?.

Singh, M., Davidson III, W. N., & Suchard, J. A. (2003). Corporate diversification strategies and capital structure. The Quarterly Review of Economics and Finance, 43(1), 147-167.

Cite this page

Paper Sample on Diversify Investment: Corporate Strategies for Risk Management. (2023, Sep 25). Retrieved from

Free essays can be submitted by anyone,

so we do not vouch for their quality

Want a quality guarantee?
Order from one of our vetted writers instead

If you are the original author of this essay and no longer wish to have it published on the ProEssays website, please click below to request its removal:

didn't find image

Liked this essay sample but need an original one?

Hire a professional with VAST experience and 25% off!

24/7 online support

NO plagiarism