In addition, companies may also explore diversification Just to get a valuable comparison between this strategy and expansion. Types of diversifications Moving away from the core competency is termed as diversification. Diversification involves directions of development which take the organisation away from its present markets and its present products at the same time. For example, an automobile manufacturer may engage in production of passenger vehicles and light trucks.
Ansoff pointed out that a diversification strategy stands apart from the other three strategies. The first three strategies are usually pursued with the same technical, financial, and merchandising resources used for the original product line, whereas diversification usually requires a company to acquire new skills, new techniques and new facilities.
Therefore, diversification is meant to be the riskiest of the four strategies to pursue for a firm. Rationale of diversification There are two dimensions of rationale for diversification. Diversification may be defensive or offensive. Management may expect great economic value growth, profitability or first and foremost great coherence and complementarities with their current activities exploitation of know-how, more efficient use of available resources and capacities.
In addition, companies may also explore diversification just to get a valuable comparison between this strategy and expansion. Types of diversifications Moving away from the core competency is termed as diversification.
Diversification involves directions of development which take the organisation away from its present markets and its present products at the same time. Diversification is of two types: For example, an automobile manufacturer may engage in production of passenger vehicles and light trucks.
Unrelated diversification is where the organisation moves beyond the confines of its current industry. For example ,a food processing firm manufacturing leather footwear as well.
The different types of diversification strategies The strategies of diversification can include internal development of new products or markets, acquisition of a firm, alliance with a complementary company, licensing of new technologies, and distributing or importing a products line manufactured by another firm.
Generally, the final strategy involves a combination of these options. This combination is determined in function of available opportunities and consistency with the objectives and the resources of the company.
There are three types of diversification: Concentric diversification does not lead the company into a completely new world as it operates in familiar territory in one of the two major fields technology or marketing.
Therefore that kind of diversification makes the task easier, although not necessarily successful. In a competitive environment, this form of diversification is desirable if the present customers are loyal to the current products and if the new products have a good quality and are well promoted and priced.
Moreover, the new products are marketed to the same economic environment as the existing products, which may lead to rigidity and instability.
Therefore, 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.
Even if this strategy is very risky, it could also, if successful, provide increased growth and profitability.Related diversification is a more successful strategy for growth among firms than unrelated diversification. Diversification is a form of growth marketing strategy for a company.
It seeks to increase profitability through greater sales volume obtained from new products and new markets. Apr 24, · Successful Diversification Stories General Electric is one of the greatest diversification success stories.
What began as an merger between two electric companies is now an international, multi-billion-dollar company and the world's 26th largest firm in the United States. Because films and television are both aspects of entertainment, Disney’s purchase of ABC is an example of related diversification.
Some firms that engage in related diversification aim to develop and exploit a core competency to become more successful. A core competency is a skill set that is difficult for competitors to imitate, . Related Diversification Is a More Successful Strategy.
or any similar topic specifically for you. Do Not Waste Your Time. HIRE WRITER. Diversification is of two types: (i) Related diversification: Related diversification is development beyond the present roduct and market, but still within the broad confines of the ‘industry (i. e. value. Diversification is of two types: (i) Related diversification: Related diversification is development beyond the present roduct and market, but still within the broad confines of the ‘industry (i.
e. value chain) in which a company operates. A diversification analysis needs to demonstrate, and support, that the business will achieve a return on the investment that more than compensates for the risk and the cost.
A business owner needs to consider efficient diversification strategies to build a competitive advantage, to achieve economies of scale or scope, and/or to take advantage of a financial opportunity that aligns with the business' strategic plan.