Diversification strategies

Diversification strategies

1. Diversification Diversification is a business development strategy allowing a company to enter additional lines of business that are different from the current products, services and markets.

2. Why do Firms Diversify? When they have excess resources, capabilities, and core competencies that have multiple uses Diminishing growth prospects in present industry Cost saving opportunities Capture strategic fits Capture financial economies Spread business risk Leverage brand name

3. Types of Diversification Horizontal Diversification: It is a strategy in which a firms long term strategy is based on growth through acquisition of one or more similar firms operating at the same stage of the production-marketing chain. - E.g. Acquisition of Arcrol by Mitta Steels Vertical Diversification : It is a process in which a firm's grand strategy is to acquire firms that supply it with inputs (such as raw materials) or are customers for its outputs (such as warehouses for finished products).

4. Concentric Diversification  : Thus, the acquiring firm searches for new businesses whose products, markets, distribution channels, technologies and resource requirements are similar to but not identical with its own, whose acquisition results in synergies but not complete interdependence. e.g. acquiring of Spice Telecom by Idea Conglomerate Diversification: A conglomerate is a Corporation made up of several smaller, independently-run companies which may operate across several sectors and industries. e.g. acquisition of Adlabs by Anil Dirubhai Ambani Group

5. STRATEGIES FOR ENTERING NEW BUSINESSES Acquisition Internal new venture (start-up) Joint venture Diversifying into New Businesses

6. Presented By: A Bhanu Prakash (2VX13MBA02)