Diversification Strategies in the Global Retailing Industry : Essays on the Dimensions and Performance Implications

Over the last decades, corporate strategy research on cross-industry diversification has typically perceived industries as homogeneous. This view downplays a firm's strategic options of diversification within its base industry. As a result, little research is available to conceptualize the diversification strategies of multiunit firms within a single industry and empirically investigate why diversified firms in the same industry perform differently. This thesis addresses this research gap by focusing on the diversification behavior of multiunit firms in the global retailing industry over a time period of thirteen years (from 1997 to 2009). Specifically, this thesis explores in three essays how a parent retailer's assortment diversification, retail format diversification, and international diversification decisions are linked to its firm performance. Essay 1 shows that corporate-level assortment diversification into food and non-food retailing increases a corporate parent's costs more than its sales, which in turn decreases its profits over time. In addition, this essay indicates that the relationship between corporate-level assortment diversification into food and non-food retailing and profit variability is an inverted U-shaped curve. Essay 2 conceptualizes related and unrelated retail format diversification based on the similarity of the retail formats' value chains and finds that parent retailers are able to outperform competition by concentrating more intensively on related retail format diversification. In contrast, the results suggest that diversification into unrelated retail formats destroys firm value. In addition, this essay indicates when parent retailers are able to develop implementation capabilities for synergy creation, which in turn enables them to create super-additive value at the corporate level. Essay 3 investigates the relationship between international diversification and firm performance. In particular, this essay examines how a retailer's ownership structure moderates the effects of intra-regional, inter-regional, and total international diversification on firm performance. The findings suggest that public firms are especially well equipped to spread their boundaries more intensively across world regions. In the last section, this thesis develops an actionable plan that can be used by corporate retail managers to develop a thoughtful diversification strategy.