Alain Closier
Oct 30, 2024
Q: Specialization or Diversification: What is the Best Value-Creating Strategy for a Company?
Monthly Commentary
Q&A with Alain Closier
Alain Closier,
Senior Advisor
Paris, France, Europe
Question:
Specialization or Diversification: What is the Best Value-Creating Strategy for a Company?
Answer:
When it comes to value creation, companies often grapple with the choice between specialization and diversification. Both strategies come with their own sets of advantages and disadvantages.
Specialization involves focusing on a single domain, allowing a company to deepen its expertise and potentially develop a competitive advantage in areas such as cost, market share, and brand visibility. However, this approach can be risky. Companies that concentrate solely on one market or product may find themselves vulnerable to technological changes or shifts in consumer preferences, as seen in numerous historical cases of once-dominant firms that vanished when their core markets collapsed.
Diversification, in contrast, entails expanding into different activities and markets, which can help mitigate risks. This strategy allows companies to exploit synergies, thereby reducing fixed costs and creating more robust revenue streams. Nonetheless, diversification can be challenging to implement effectively, especially if the synergies are weak or if the company lacks the necessary resources to support its expanded operations.
So, what is the ideal strategy?
The answer largely depends on the specific circumstances of the company, including its strengths, weaknesses, and market position.
A prudent approach involves leveraging the company’s core business, where it possesses expertise, market share, and differentiated products. At the same time, diversification should be considered cautiously—ideally in areas that complement the core business—allowing the company to climb the value chain and enhance its offerings to clients.
Ultimately, the responsibility for making these strategic decisions lies with the company’s leadership. They must carefully weigh the options and select a strategy that aligns with the company's unique context, while remaining mindful to set aside personal preferences and biases.
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Alain Closier, Senior Advisor
Paris, France, Europe
Alain Closier is a former member of the General Management Committee of the Société Générale group. With more than 35 years of experience in international banking and finance, he is, and has always been, passionate about creating innovative activities.
Alain Closier is a graduate of the National School of Statistics and Economic Administration (ENSAE) and holds a post-graduate degree in Economics from Panthéon-Sorbonne University, in Paris. He began his career as an economist, before joining the International Treasury department of Société Générale.
In the 90s, Alain was responsible for the international development of FIMAT. Originally only a French brokerage company, FIMAT has become in just a few years an international leader specializing in brokerage on derivative stock markets with a presence in more than 25 countries.
Alain Closier was also the creator of FIMATEX, a precursor of online brokers. In 2000, FIMATEX was one of the largest IPOs in Paris in the internet sector. After several mergers and acquisitions, FIMATEX became Boursorama, today one of the French leaders in online banking.
Alain Closier's work has been rewarded on several occasions by international financial institutions. As Director of Société Générale Securities Services (SGSS), he was elected “European Personality of the Year in Asset Servicing” in 2010 by Funds Europe magazine. Its teams were recognized both for their expertise in emerging markets and for their presence on a European scale.
Overseeing the development of the bank's venture capital activities in Silicon Valley during the 2000s, Alain Closier acquired in-depth knowledge of the problems encountered by start-ups, both in the United States and in Europe.
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