In the industrialized sector, all companies see their evolution through the specialization of a certain activity. Allocating every resource to the exploitation of a main business activity engenders the creation of a core competency unique to the firm in question. This competency will allow the company to gain competitive advantage over rivals. After acknowledging the firm’s reason of existence, the subsequent step the firm must carry is to develop corporate strategies that outline how the business must be conducted. Finding ways to increase the number of business activities; which are in-line with the core of the business, helps the firm penetrate untapped markets and remain competitive. The company must always alter its ways of doing or even its business activities when exposed to changes in the corporate environment. But the question here is until what point? The firm must find the right balance between the number of new advances that can be brought to the company and the expected payoff of these advances. The company must assure that every business activity is centralized around one core corporate activity and forgo the possibility of earning high returns with an activity that is not related to the business. Under Guy Dejouany’s control, CGE generated tremendous cash flows from the management of the municipal water services in France. As revenues kept on rising, CGE became part of “le noyaux durs” in France and made itself a reputation across the world. But at one point in time, Guy Dejouany shifted his practices based on value-creation towards the diversification of its business practices. Earnings from the core utilities businesses allowed CGE to diversify. Many of CGE’s decisions were based on expanding into new businesses. Dejouany’s approach was to allow outside parties that he trusted to bring their knowledge of the market to CGE. The diversification strategy stemmed from the close relationships that Dejouany established...
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