What Is Business Mix?
Business mix refers to the array of products, services, or market segments that a company operates within. It is a fundamental concept within Corporate strategy, defining the scope and breadth of a firm's operations. A well-considered business mix aims to optimize various factors, including risk management and the utilization of a company's resources. The particular combination of activities making up a business mix can significantly influence a company's competitive standing and overall market position. It reflects strategic decisions about where a company chooses to compete and how it allocates its efforts across different areas of its enterprise, ultimately impacting its potential for growth.
History and Origin
The concept of managing a "business mix" has evolved alongside modern strategic management principles. Early strategic thinkers recognized that companies needed to decide not only how to compete in existing markets but also which markets and industries to enter. A pivotal work in this evolution was Alfred D. Chandler Jr.'s 1962 book, Strategy and Structure: Chapters in the History of the Industrial Enterprise, which explored how a company's organizational structure adapted to its chosen strategy, including the expansion into new business areas4. This historical perspective highlighted how businesses, particularly large industrial enterprises, began to consciously shape their portfolio of operations. Later, Igor Ansoff, through his seminal 1965 work Corporate Strategy, introduced the Ansoff Matrix, formally categorizing growth strategies, with "diversification" representing the entry into new products and new markets, thereby directly influencing the composition of a company's business mix3. The post-World War II era saw a trend toward corporate expansion and the formation of conglomerates, which diversified across seemingly unrelated industries, actively shaping their business mix to achieve scale and perceived stability.
Key Takeaways
- Business mix defines the range of products, services, and markets a company engages in.
- It is a core element of corporate strategy, impacting a firm's risk profile and revenue streams.
- Decisions about business mix involve balancing opportunities for growth with resource allocation challenges.
- A firm's business mix can range from highly focused (single-business) to widely diversified (multiple, unrelated businesses).
- Optimizing the business mix seeks to enhance long-term shareholder value and sustainability.