DIVERSIFICATION

“Diversification is only required when investors do not understand what

they are doing.” - WARREN

BUFFETT

Presented By
HILDA MARY.L
MP09394
OVERVIEW

 MEANING
 ANSOFF MATRIX
 REASONS FOR DIVERSIFICATION
 TYPES OF DIVERSIFICATION
 EXAMPLES
MEANING OF DIVERSIFIED BUSINESS

 Business that operates in more than one industry or market and uses
different distribution channels as a matter of corporate strategy

 A company may attempt to manufacture the products itself or it may

acquire or merge with an on going organization
DIVERSIFICATION

 Diversification is a set of strategies. these strategies involve all the

dimensions of strategic involvement. it may involve internal or
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.
 PRINCIPAL OBJECTIVES

 Improving core process execution

 Enhancing a business unit’s structural position

ANSOFF MATRIX
WHAT IS MARKET PENETRATION?

 Market penetration refers to a strategy by which an organisation

takes increased share of its existing markets with its existing product
range
WHAT IS PRODUCT DEVELOPMENT?

 Product development refers to a strategy by which an organisation

delivers modified or new products to existing markets.
WHAT IS MARKET DEVELOPMENT?

 Market development refers to a strategy by which an organisation offers

existing products to new markets
 WHAT IS DIVERSIFICATION?

 Diversification refers to a strategy by which an organisation

pursues new product offerings and new markets.
 Diversification is a risk management technique that mixes a
wide variety of investments within a portfolio (
www.investopedia.com).
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.
 DIFFERENT TYPES OF DIVERSIFICATON

 Concentric diversification
 Conglomerate 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.

 Types:
 MARKETING RELATED
 TECHNOLOGY RELATED
 MARKETING AND TECHNOLOGY RELATED.
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 FMCG, hotels, IT, Packaging.
EXAMPLES OF DIVERSIFIED BUSINESS

 P&G
 TATA
 RELIANCE
 PEPSICO
 ITC
 PERSONAL & BEAUTY

Deodorants Soap Hair care Skin Care Oral Care

old spice Olay Head & Shoulder Braun Oral -B

secret Ivory Pantene Gilette Glide

Camay Fixodent

Crest
 HOME PRODUCTS

Laundry Paper Batteries Dishwash Coffee

Care Products
Tide Charmin Duracell Dawn Milestone
Bounce Puffs Duracell Joy Bru
Advanced
Cheer Ivory
Era
 HEALTH & WELLNESS

Health Care Drugs Child care Pet care

Vicks Actonel Pampers Pedigree

Bismol Microbid
luvs Eukanuba
Align Dantrium
Dreft Lams
Metamuol Enablex
Prilosec -OTC Charmin Children
 Tata Group

 Tata Group is one of the India’s largest and most respected business
conglomerates
 98 operating companies in seven sectors
 Group was founded by Jamsetji Tata in the mid 19th century
 The Tata family of companies shares a set of five core values: integrity,
understanding, excellence, unity and responsibility
 Tata group has its operations in more than 80 countries across six continents,
and its companies export product and services to 85 countries
 Major companies

 TCS – Software firm

 TISCO – iron and steel firm
 Tata telecommunications
 Tata tea Inc – major brands are Tata tea, Tetley tea etc.,
 Tata Motors –Indica, Indigo, Nano
 Tata Construction equipment company
 Reliance ADAG Companies

 Reliance capital - interest in asset mgt and mutual funds, life and
general insurance private equity and proprietary investments and stock
broking
 Reliance Communications Limited
 Reliance Energy Limited
 Reliance Health
 Reliance Media and Entertainment – ADLABS, Big FM, Mobile TV,
DTH
 ITC Ltd

 The company was incorporated

way back in 1910 under the
name IMPERIAL TOBACCO
COMPANY OF INDIA
LIMITED. Soon it was
renamed as I.T.C Ltd. In
1974.The company is market
leader in Indian cigarette
business
 ITC Ltd

 FMCG
 Cigarettes
 Food
 Lifestyle Retailing
 Greetings and stationery
 Safety Matches
 Incense sticks
 Hotels
 Paperboards and Packaging
 Paperboards and specialty papers
 packaging
 Agri-Business
 Agri- exports
 E-choupal
 Information Technology
 ITC - Cigarettes

 Insignia
 India Kings
 Classic
 Gold Flake
 Silk Cut, Navy Cut
 Scissors, Capstan
 Berkeley
 Bristol and
 Flake in its cheap cigarettes portfolio.
 PepsiCo Company

 PepsiCo, Inc. was established in 1956

 Manufacture, market and sell more than 500 products that serve the needs of
consumers of all ages in more than 200 countries.
 Largest brands include,
• Fruit juices (Tropicana and Dole)
• Sport Drinks (Gatorade)
• Snack Foods (Frito, Lay’s, Ruffles, Doritos, Chee-tos, and Sun Chips)
• Cereals, rice, and breakfast products (Quaker oatmeal, Cap’ n Crunch,
Life, Quaker rice cakes, and Quaker grits)
 PepsiCo Company

 Doritos  7UP
 Funyuns  Lipton teas
 Frito-Lay,  Pepsi-Cola,
 Quaker  Diet Pepsi,
 Lay’s,  Mountain Dew,

 potato chips  Pepsi-Cola,

 Tropicana,
 Ruffles potato chips
 Gatorade
 Tostitos tortilla chips
 Gatorade thirst quencher,
 Fritos corn chips
 Aquafina bottled water
 Doritos tortilla chips
 Mirinda carbonated soft drinks,
 Cheetos cheese flavored snacks
 Sierra Mist carbonated soft
 Quaker cereals drinks .