The document discusses different diversification strategies that companies can pursue, including concentric and conglomerate diversification. Concentric diversification involves entering related businesses through marketing-related, technology-related, or combined marketing and technology approaches. Conglomerate diversification means entering unrelated businesses. Reasons for diversification include spreading risk, taking advantage of new opportunities, and stabilizing returns across industries. The document also provides examples of companies that have used diversification strategies, such as Mercedes-Benz diversifying into new commercial vehicle applications.
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The document discusses different diversification strategies that companies can pursue, including concentric and conglomerate diversification. Concentric diversification involves entering related businesses through marketing-related, technology-related, or combined marketing and technology approaches. Conglomerate diversification means entering unrelated businesses. Reasons for diversification include spreading risk, taking advantage of new opportunities, and stabilizing returns across industries. The document also provides examples of companies that have used diversification strategies, such as Mercedes-Benz diversifying into new commercial vehicle applications.
The document discusses different diversification strategies that companies can pursue, including concentric and conglomerate diversification. Concentric diversification involves entering related businesses through marketing-related, technology-related, or combined marketing and technology approaches. Conglomerate diversification means entering unrelated businesses. Reasons for diversification include spreading risk, taking advantage of new opportunities, and stabilizing returns across industries. The document also provides examples of companies that have used diversification strategies, such as Mercedes-Benz diversifying into new commercial vehicle applications.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online from Scribd
The document discusses different diversification strategies that companies can pursue, including concentric and conglomerate diversification. Concentric diversification involves entering related businesses through marketing-related, technology-related, or combined marketing and technology approaches. Conglomerate diversification means entering unrelated businesses. Reasons for diversification include spreading risk, taking advantage of new opportunities, and stabilizing returns across industries. The document also provides examples of companies that have used diversification strategies, such as Mercedes-Benz diversifying into new commercial vehicle applications.
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“ Diversification Strategies ” DIVERSIFICATION Diversification is a set of strategies. these strategies involve all the dimensions of strategic involvement. it may involve internal pr external, related or unrelated, horizontal or vertical ,and active or passive dimensions either singly or collectively. Diversification involves a substantial change in the business definition singly or jointly in terms of customer functions, customer groups, or alternative technologies of one or more of a firm’s businesses. DIFFERENT TYPES OF DIVERSIFICATION STRATEGIES Concentric diversification… CONCENTRIC DIVERSIFICATION When an organization takes up an activity in such a manner that it is related to the existing business definition of one or more of a firm’s businesses, either in terms of customer groups, customers functions or alternative technologies, it is called concentric diversification. Concentric diversification is of three types: MARKETING RELATED DIVERSIFICATION. TECHNOLOGY RELATED DIVERSIFICATION. MARKETING AND TECHNOLOGY RELATED DIVERSIFICATION. Marketing related concentric diversification: When a similar type of product is offered with the help of unrelated technology…
Technology related concentric
diversification: When a new type of product or service is provided with the help of related technology…
Marketing and technology related
concentric diversification: when a similar type of product or service Reasons for concentric Diversification Realizing financial synergies in terms of transaction cost savings and tax savings. Realizing informational synergies by using common sources of information, databases and information networks. Realizing operational synergies through economies of scale. Realizing personnel synergies through utilizing human resource with common skills and competencies for another business. CONGLOMERATE DIVERSIFICATION When an organization adopts a strategy which requires taking up those activities which are unrelated to the existing business definition of one or more of its business either in terms of their respective customer groups , customer functions or alternative technologies it is called conglomerate diversification. Example – The Aditya Birla Group is in a variety of unrelated business such as Aluminum, BPO, Cement ,Chemicals, Software , Telecom, Textiles etc. Polar Group (Fans , Marble and Granite) ITC Groups is in Agri bus. FMCG, hotels, IT, Packaging. REASONS FOR CONGLOMERATE/UNRELATED DIVERSIFICATION Spreading business risks by investing in different industries. Maximizing returns by investing in profitable business and selling out unprofitable ones. Taking advantage of emerging opportunities afforded by an expanding economy and encouraging gov. policies. Migrating from bus. Under threat from the bus. Environment. Stabilizing returns by avoiding economic upswings and downswings through having stakes in different industries. ADVANTAGES/DISADVANTAGES OF CONCENTRIC DIVERSIFICATION (Advantages) Enable a firm to attain synergy by exchange of resources and skills. To avail economies of scale and tax benefits.
(Disadvantage) Increase in risk and commitment Reduction in Flexibility ADVANTAGES/DISADVANTAGES OF CONGLOMERATE DIVERSIFICATION (Advantages) Better management and allocation of cash flows. Realizing a high return on investment. Reduction of risk by spreading investment in different business and industries. (Disadvantages)
Diversion of resources and attention to other areas
leading to a lack of concentration. Facing the risks of managing entirely new business. Why Diversification strategies adopted? Diversification strategies are adopted to minimize risk by spreading it over several businesses. E.g. Seasonal products. Diversification may be used to capitalize on its capabilities and business model so as to maximize organizational strengths or minimize weaknesses. E.g. co. having Core competency in the area of After- sales services. Diversification may be only out if growth in exiting business in blocked due to environmental and regulatory factors. E.g. cigarette making co.
Product Expansion strategy of leading brand Mercedes. Mercedes Benz is a global car company. It apply diversification strategy by introducing new Actros tipper to get niche applications.
The truck will address the need of Indian mining
sector. Diversification is apply considering the demand for heavy duty tippers by mining sector and huge power plan of India. Continue….. Another sector for diversification is dimension cargo movement application which can carry load of 240 tones. Other applications are like for fighting systems which in fact considers the Mumbai Fire Brigade. They diversified themselves in some of commercial vehicles which are light, medium, heavy vehicles. Examples…… Essar Group:- shipping, marine construction, oil support services, and iron ,steel. Shriram Fibers Ltd.:- nylon industrial yarn, synthetic industrial fabrics, nylon tyre cords, fluorochemicals, fluorocarbon refrigerant gases, ball and needle bearings, auto electrical, hire- purchase and leasing and financial services. Reliance ‘ADAG’ Group. Thank You .
