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Strategic diversification and capacity utilization


Pennings, Enrico; Natter, Martin (2001). Strategic diversification and capacity utilization. International Journal of Production Economics, 72(3):261-272.

Abstract

This paper analyzes acquisitions resulting in a product line expansion of a firm. When the firm faces a non-stationary and stochastic demand in both the current and the new product line, switching between the production facilities may give diversification advantages. Switching between production facilities is similar to holding an inventory for both products. A case in the beverages industry illustrates that even when switching costs are relatively high as compared to inventory costs, switching has significant advantages over holding inventories.

Abstract

This paper analyzes acquisitions resulting in a product line expansion of a firm. When the firm faces a non-stationary and stochastic demand in both the current and the new product line, switching between the production facilities may give diversification advantages. Switching between production facilities is similar to holding an inventory for both products. A case in the beverages industry illustrates that even when switching costs are relatively high as compared to inventory costs, switching has significant advantages over holding inventories.

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4 citations in Web of Science®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:2001
Deposited On:09 Dec 2016 11:28
Last Modified:19 Feb 2018 22:10
Publisher:Elsevier
ISSN:0925-5273
OA Status:Closed
Publisher DOI:https://doi.org/10.1016/S0925-5273(00)00161-4
Other Identification Number:merlin-id:14212

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