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Definition: Relatedness

Relatedness refers to the commonality between any two products, companies or industries. Relatedness can be seen in product offerings, business models, companies and even industries.

Relatedness is an important factor firms consider while diversifying – it is believed that diversifying into related businesses improves performance. There are different types of relatedness:

• Operational relatedness: usage of common resources and capabilities across operations – for example sharing of common distribution network between different products/brands etc. Main benefits include economies of scale (i.e cost reduction due to high volume) and economies of scope( cost reduction owing to multiple product lines)

• Strategic relatedness: usage of common skills and capabilities across businesses at the corporate level


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