Diversification or specialization: The role of risk

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The purpose of this article is to analyse the use of diversification and market specialization as corporate strategies by non-ferrous metal company managements as responses to adverse financial conditions. The analytical framework is provided by the financial theory of risk. Managements must deal with both company specific risk and market risk as they attempt to improve the profitability of their companies. Companies from the US copper industry are used as empirical examples. Deversification is a flexible but risky strategy. Specialization is a more restrictive strategy but it is less risky. The appropriate strategy to use depends on the particular situation of a company.

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© 1990 Elsevier Ltd. Publisher’s version of record: http://dx.doi.org/10.1016/0301-4207(90)90041-9

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