Presentation on Conglomerate Diversification

Presented by Pawan singh Geetha

Conglomerate Diversification
Under this strategy, dissimilar products/services are added to the existing line of business. Such product/services are altogether different, but are sharing a common base (of company). For Ex: Sugar-Industry

Paper-Industries

That means, the suggested products may be grouped with existing product line (by sharing a common base).

Problems with conglomerate or unrelated diversification: Managers often lack expertise or knowledge about their firms businesses.

It is a growth strategy that involves adding new products or services that are significantly different from the organizations present products or services. Such a form of strategy requires knowledge of available opportunities and threats to the company before taking decision to diversify.

Objectives:
I. To achieve growth rate higher than what can be realized through expansion.

II. To avail of potential opportunities of profitable investment. III. To spread the gain of increased stability. IV. To achieve distinct competitive advantage and broader stability. V. To improve the price earning ratio and bring about a higher market-price of shares. VI. To make better use of financial resources.

This strategy can be achieved internally or externally- through the means of mergers and jointventures, which are common in practice. Internal Conglomerate Diversification: In India, the growth of Godrej, Reliance Industries, HMT, and DCM is the result of conglomerate diversification mainly through internal development.

External Conglomerate Diversification: These are done through acquisitions, mergers and jointventures.
EX: MARUTI SUZUKI JOINT VENTURE, NIPPON DENRO ISPAT Ind., TATA and BRITISH Petroleum have been introduced to Indian business scenario.

Thank you