20844747 diversification strategy

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resentation onresentation on iversificationiversificationtrategiestrategies


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DIVERSIFICATION

Diversification is a set of strategies. these strategies involve allthe dimensions of strategic involvement. it may involveinternal pr external, related or unrelated, horizontal or

vertical ,and active or passive dimensions either singly orcollectively.

Diversification involves a substantial change in the businessdefinition singly or jointly in terms of customer functions,customer groups, or alternative technologies of one or more ofa firms businesses.

DIFFERENT TYPES OF DIVERSIFICATIONSTRATEGIES

Concentric diversification


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CONCENTRIC

DIVERSIFICATIONWhen an organization takes up an activity in such a mannerthat it is related to the existing business definition of one ormore of a firms businesses, either in terms of customergroups, customers functions or alternative technologies, itis called concentric diversification.

Concentric diversification is of three types:

MARKETING RELATED DIVERSIFICATION.

TECHNOLOGY RELATED DIVERSIFICATION.

MARKETING AND TECHNOLOGY RELATED

DIVERSIFICATION.


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Marketing related concentric

diversification: When a similar type of product is offered

with the help of unrelated technology

Technology related concentricdiversification:

When a new type of product or service isprovided with the help of related

technology

Marketing and technology relatedconcentric diversification:

when a similar type of product or service


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Reasons for concentricDiversification

Realizing financial synergies in terms of transactioncost savings and tax savings.

Realizing informational synergies by using common

sources of information, databases andinformation networks.

Realizing operational synergies through economiesof scale.

Realizing personnel synergies through utilizinghuman resource with common skills andcompetencies for another business.


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CONGLOMERATEDIVERSIFICATIONWhen an organization adopts a strategy which requires

taking up those activities which are unrelated to theexisting business definition of one or more of itsbusiness either in terms of their respective customergroups , customer functions or alternative

technologies it is called conglomerate diversification.

Example The Aditya Birla Group is in a variety ofunrelated 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.


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REASONS FORCONGLOMERATE/UNRELATED

DIVERSIFICATIONSpreading business risks by investing in different

industries.

Maximizing returns by investing in profitable businessand selling out unprofitable ones.

Taking advantage of emerging opportunities afforded byan expanding economy and encouraging gov. policies.

Migrating from bus. Under threat from the bus.

Environment.

Stabilizing returns by avoiding economic upswings anddownswings through having stakes in differentindustries.


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ADVANTAGES/DISADVANTAGESOF 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


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ADVANTAGES/DISADVANTAGESOF 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.


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Why Diversification

strategies adopted?

Diversification strategies are adopted to minimize riskby spreading it over several businesses. E.g. Seasonalproducts.

Diversification may be used to capitalize on itscapabilities and business model so as to maximizeorganizational 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 exitingbusiness in blocked due to environmental andregulatory factors. E.g. cigarette making co.


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ro uc xpans onstrategy 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 miningsector.

Diversification is apply considering the demand forheavy duty tippers by mining sector and hugepower plan of India.


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Continue..Another sector for diversification is dimension

cargo movement application which can carryload of 240 tones.

Other applications are like for fighting systemswhich in fact considers the Mumbai FireBrigade.

They diversified themselves in some ofcommercial vehicles which are light, medium,

heavy vehicles.


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ExamplesEssar Group:- shipping, marine construction, oil

support services, and iron ,steel.

Shriram Fibers Ltd.:- nylon industrial yarn,synthetic industrial fabrics, nylon tyre cords,fluorochemicals, fluorocarbon refrigerantgases, ball and needle bearings, autoelectrical, hire- purchase and leasing andfinancial services.

Reliance ADAG Group.


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.hank You.hank You

20844747 diversification strategy

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