Diversification

ABC
Ltd.

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 What is Diversification ?
 A company is diversified when it is in two or
more lines of business
 Strategy-making in a diversified company is
a bigger picture exercise than crafting a
strategy for a single line-of-business

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 When Does Diversification
Start to Make Sense?
Strong competitive Weak competitive
position, rapid market position, rapid market
growth -- Not a good growth -- Not a good
time to diversify time to diversify

Strong competitive Weak competitive

position, slow market position, slow market
growth -- growth --
Diversification is top Diversification merits
priority consideration consideration
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Stages in Transitioning from a Single
Business to a Diversified Company
What
STAGE 1:
1 Small single-business next?

serving a regional market

STAGE 2:
2 Geographic expansion
STAGE 3:
3 Diversification--usually initiated
when growth opportunities
dwindle in the company’s
present business

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 Strategies for Entering
New Businesses

Acquire existing company

Start-up new business internally

Joint venture with another company

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 Types

 Concentric diversification
 Horizontal diversification
 Conglomerate diversification

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 Concentric diversification
 This means that there is a technological similarity
between the industries .
 that the firm is able to leverage its technical know-
how to gain some advantage .
 For example , tomato ketchup and sauce to the
existing "Maggi" brand .

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 Horizontal diversification
 The company adds new products or services that
are technologically or commercially unrelated to
current products . but which may appeal to current
customers.
 For example company was making note books
earlier now they are also entering into pen market
through its new product .

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 Conglomerate diversification

 The company markets new products or services

that have no technological or commercial synergies
with current products, but which may appeal to new
groups of customers.
 It has very little relationship with the firm's current
business.
 the main reasons of adopting such a strategy are
first to improve the profitability and the flexibility of
the company,
 and second to get a better reception in capital
markets as the company gets bigger.
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 Conclusion
 An organisation with strong competitive position
and slow market growth,
 And weak competitive position and slow market
growth should go for DIVERSIFICATION.

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 Thank you
 Lokesh Kumar Sahu

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