Diversification in Global Business

1. YANG (000756133) 2. NINEK (000751561) 3. NGA (000756528 4. STELLA (000517071) 5. GAYATHRI (000762432)

Group 2

Global Business

content
Introduction The reason of diversification Type of diversification Role of diversification Conclusion

INTRODUCTION
diversification
Diversification is a form of corporate strategy for a company. It seeks to increase profitability through greater sales volume obtained from new products and new markets.

INTRODUCTION
Global Market marketing on a worldwide scale reconciling or taking commercial advantage of global operational differences, similarities and opportunities in order to meet global objectives.

INTRODUCTION
Diversification is a common company strategy in global maket. This strategy brings billions of pounds every year.

WHY DIVERSIFICATION?
Putting all your eggs in a single basket : inefficient strategy.

follows overall market instead of limited market.

Explosive growth in international capital flows.

helps to adopt new culture.

positive influence on economy of developing country.

Improve employment opportunity.

TYPES OF DIVERSIFICATION
Basics to classify - Synergy - Relatedness
Identify economies of scale in multibusiness firms. Measure relatedness = measure how to businesses share technological characteristics, production characteristics and distribution channel.

2 main types of diversification

Synergy Relatedness

Horizontal - Share both relationships/ tangible and Related intangible resources

- Promotion of revenue from primary activities: < 70% - Other lines of businesses are related to primary ones Hierarchical - Value creation - Promotion of revenue relationships/ derives from from primary activities: < Unrelated/ cooperate office 70% Conglomerat - Leverage - Few activities are e support activities related to primary areas

Hair care: Pantene, Head & Shoulders, Clairol Household cleaning/care : Flash, Febreze, Fairy Laundry: Daze, Ariel, Fairy, Bounce Paper: Bounty, Pampers, Allways Beauty: Oil of Olay, Max Factor Beverages: Sunny Delight Snacks: Pringles Pet food: Aims

Related business: P&G

Examples

 Examples (cont) Unrelated business: Samsung 1938: established as a small export business 1972 - present: produced TV Electronics Industries: ElectroMechanics, SDI, Corning Precision Materials, SDS, Mobile Display, LED Machinery & Heavy Industries Chemical Industries Financial Services

ADVANTAGES:
Reducing

costs, risks and uncertainties. Accessing complementary assets and learning opportunities. Possibilities to use alliances as real options.

DISADVANTAGES:

Choosing wrong partners

Potential partner opportunism Risks of helping nurture competitors(learning race)

CONCLUSION:
1. Risk Reduction Risk = Return 2. Growth Gaining Brand Value 3. Profitability Primary goal of all business ventures 4. Sustainability Managing financial, social and environmental risks

CONCLUSION:
cultural differences may sometimes make it difficult for the company to sustain Entry into multiple markets may reduce the focus on the core activities.

Reduces the risk in the first instance .

Diversification: A Failure of Fact or Expectation?

REFERENCES:
Lee, W. & Lee, N. (2007), Understanding Samsungs diversification strategy: The case of Samsung Motors Inc, Elsevier, pp. 489-504
Samsung Group n.d. Retrieved: 21st February, 2013 from http://www.samsung.com Fabozzi, Frank J., Franco Modigliani, Michael G. Ferri. 1994. Foundations of Financial Markets and Institutions. Englewood Cliffs, NJ: Prentice Hall Inc. Kasa, Kenneth. 1994. "Measuring the Gains from International Portfolio Diversification."FRBSF Weekly Letter 94-14 (Apr 8).

QUESTIONS..?