Business Diversification Strategy

A Dissertation synopsis submitted in partial fulfilment of requirements for

Bachelor in Business Administration (Family Business & Entrepreneurship)

Under the Guidance of

Dr. Rajesh Mokale
Assistant Professor
School of Business, UPES
 Abstract

When thinking about building a diversified portfolio, remember the old phrase "Don't put all
your eggs in one basket. Diversification isn't just about the amount invested in portfolio; it is
also about the relationship between these investments. Diversification becomes one attractive
strategy when a company is running out of opportunities for profitable growth in its core
business Company. In a diversified company, the challenge of developing a strategy is to
evaluate a number of industrial environment and recommend a set of business strategies in
which it operates. Multinational diversification strategies represent the diversity of firms and
the diversity of market. Despite the complexity of having to design and manage multiple
strategies, this strategy has significant appeal and more competitive potential. Research
focuses on how is the diversification strategy applied to different sectors. It covers the basic
concept of a successful diversification strategy.
 Introduction

Corporate diversification is a strategy that includes the choice of structure operate in such a
way that it promotes the company`s involvement in a broader scope any industry is to
diversify production and assets through a range of activities, the company diversifying into an
industry that is technologically similar to the industry he is currently engaged, he will use a
concentric diversification strategy. Horizontal diversification occurs when a company
develops or acquires new products its core business or technology, but can attract its existing
customers. strategy is implemented when a company believes to offer a wider range of goods
and existing customers are loyal to existing products and new products are well promoted, It
can also happen when a company is embarking on a new activity (related to Corporation
diversification is where a company enters (by acquisition or merger) The motive is to attract
new customers, thereby improving profits and profits and market power increased. the
synergy between the new and the old, and the fear that the company spends too much energy
on new aspects of its operations could swallow up part of its business.
Value and diversification firms are subject to "diversification discounts”. However,
subsequent studies have challenged the data The impact of diversification on productivity,
which in turn affects Diversification is beneficial (bad) for the company, it will lead to
productivity for diverse companies.
In the Indian context, emerging and less developed markets and shows that companies have
increased diversification quadratic relationship between firm performance and group
diversification on regression, their analysis of mutual funds held by groups of companies in
India found that the funds focusing on group related industries earns almost 50 basis points
more per month than on a sample of 240 Indian firms considering return on sales (ROS) and
return on assets (ROA) as their dependent variables and degree of internalization and group
affiliation as firm performance while affiliation to a group impacted the relationship between
degree of internationalization and firm performance negatively such that highly
internationalized firms were found to perform better if they were not affiliated to a business
group. examine the relationship between diversification and performance in the context of the
horizontal diversification to the performance of a firm and to detect the existence of an on
analysis, a negative relationship between diversification and performance. Also, the optimal
number of 4-digit industries/segments for a firm to be involved in, assuming the firm is
considering the diversification strategy, is found to be 5.
 Literature Review

Diversification is observed mainly in developed countries such as USA, UK and others

European countries, as well as in Japan. However, the number of diversified firms varies
from country to country. It is explained by the difference in the institutional environment in
which diversification takes place. Diversification strategy was abandoned in the early 1980s
many companies have focused on core activities and shunned over-diversification. In the
early 1990s firms operating in unrelated sectors are in the minority compared to for those
operating in related industries, so a trend towards diversification was observed.
Some researchers argue that in emerging and developing countries underdeveloped
economies of capital markets, product markets, The labor market and inconsistent regulations
are why Diversification strategies are practiced more often and diversify much more
companies perform better than a single company. Business group subsidiaries in emerging
economies have less difficulty in resources through the domestic market.
Initially, the diversification strategy was defensive in nature, and after the crisis regarding the
transformation, it changed the character and became more attack, targeting diverse groups of
mixed or related activities. They mainly adopt forward and backward vertical diversification
strategy to strengthen their competitive position, become independent suppliers and/or
customers, improving product quality and lower costs.
 Problem Statement

Organizations within the product manufacturing industries continue to face stiff competition
in spite of the steaming economic fortune and flamboyant financial statement made by
organizations. As a result of non-availability of resource, poor electricity supply
technological change, unstable governmental regulations, economic instability and the
incursion of new entrants` especially foreign investors into the manufacturing industry and
dynamism in consumer taste and preference to existing products, unstable demand on
products and switching cost of organizations continues to increase. Nevertheless,
organisations, irrespective of their adoption of diversification strategy and opportunities
identified in the business environment, still find it difficult to survive. Consequently,
organizations are increasingly faced with business threats and risks which leads to extinction
of most companies due to strategic inertia, poor resources utilization and poor adoption of
strategy that are not in consonance with their philosophy and core values, which could result
to retrogressing performance.
Therefore, this study examined the impact of diversification and organizational performance.
As the production of new products in an unfamiliar market or territory involves enormous
risks such as investment costs hampered by innovation base revenue and technological
changes, rejection, abandoned and abandoned, this study will also examine whether a
diversification strategy is an expansion strategy, a turnaround strategy, or a means by which
organizations use excess cash.
.
 Purpose of The Study

The purpose of the study is to examine the effect of diversification strategy on organization’s
performance to gain new insight into the true nature of the relationship between
diversification and performance, as well as to explore the roles the country environment and
time can play on this relationship.
 Methodology

 Research Design

This study will be survey research design to examine the effect of diversification
strategy on organization’s performance. Survey research design ensures that a group
of people is studied by collecting analysing data from only a few people considered to
be representative of the entire group. It uses a questionnaire to determine the opinions,
preferences, attitudes and perceptions of people about issues that concern them. A
survey design is suitable for this research because it is going to make use of a
questionnaire to elicit information from the respondents.

 Population of Study

The population of the study consists of about 100 respondents were selected based on
their knowledge the effect of diversification strategy on organization’s performance.
  Sample and Sampling Techniques

A sample of 40 was selected out of the population of 100 for the purpose of the study

 Method of Data Collection

Data for the study was drawn from Secondary sources. Basically, annual reports from the
selected companies, and publications will be used for the study. This conforms to the fact that
organizations performance is usually viewed from their annual report.
 References

Diversification strategy and firm performance by Udosen Itohowo

Diversification Strategy, Enterprise Core Competence and Enterprise Performance by

Han Le

Four decades of research on Business diversification by Diana Benito-Osorio, Luis A ́

ngel Guerras-Martın and Jose ́Angel Zuniga-Vicente

The Diversification Strategy and Business Groups’ Performance in India

Corporate Diversification Strategies: Indian Perspective by Navin Dubey

Diversification and firm performance: A study of Indian manufacturing firms by

Archana Ravichandran and Saumitra Bhaduri

Diversification-strategies for managing a business by Kannan Paulraj and R

Saravanan