HYPOTHESIS: “IF YOU WANT TO GROW, THEN

DIVERSIFY”

DEFINITION Diversification is a form of corporate strategy for a company that seeks

to increase profitability through greater sales volume obtained from new products and
new markets. Diversification can occur either at the business unit level or at the corporate
level. At the business unit level, it is most likely to expand into a new segment of an
industry which the business is already in. At the corporate level, it is generally entering a
promising business outside of the scope of the existing business unit.

Diversification is part of the four main marketing strategies defined by the Product/Market
Ansoff matrix:

Products

Present New

Market Product
Present Penetration Development
Markets
Market
New Diversification
Development

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.

Diversification is a means by which a firm expands from its core business into other product
markets. Research shows corporate management to be actively engaged in diversifying
activities. It was found that in 1974 only 14 percent of the Fortune 500 firms operated as
single businesses and 86 percent operated as diversified businesses. Many researchers note
a rise in diversified firms. European corporate managers according to a survey, not only
favor it but actively pursue diversification. Firms spend considerable sums acquiring other
firms or bet heavily on internal R&D to diversify away from their core product/markets. Of
late U. S. firms are beginning to moderate their zeal for diversification and are consolidating
around their core businesses. But this trend has not affected large Asian corporations which
continue to remain highly diversified.

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Diversification can improve debt capacity, reduce the chances of bankruptcy by going into
new product/ markets, and improve asset deployment and profitability. Skills developed in
one business transferred to other businesses, can increase labor and capital productivity.
A diversified firm can transfer funds from a cash surplus unit to a cash deficit unit without
taxes or transaction costs. Diversified firms pool unsystematic risk and reduce the variability
of operating cash flow and enjoy comparative advantage in hiring because key employees
may have a greater sense of job security. These are some of the major benefits of
diversification strategy.

Diversification, firm size, and executive compensations are highly correlated, which may
suggest that diversification provides benefits to managers that are unavailable to investors,
creating what economists call the agency problem and managers stand to lose if they
become unemployed, either through poor firm performance or bankruptcy. Diversification
can also lead to the problem of moral hazard, the chance that people will alter behavior
after entering into a contract-as in a conflict of interest by providing insurance for managers
who have invested in firm specific skills, and have an interest in diversifying away a certain
amount of firm specific risk and may look upon diversification as a form of compensation.
Although it may be necessary for a firm to reduce firm specific risk to build relations with
suppliers and employees, only top managers can decide what is the right amount of
diversification as insurance. Diversification can be expensive and place considerable stress
on top management. These are the costs of diversification.

As in any economic activity there are costs and benefits associated with diversification, and
ultimately, a firm's performance must depend on how managers achieve a balance between
costs and benefits in each concrete case. Moreover, these benefits and costs may not fall
equally on managers and investors. Management researchers argue that diversification
prolongs the life of a firm. Researchers in finance argue diversification benefits managers
because it buys them insurance, and shareholders usually bear all the costs of such
insurance.

A concept known as Specialization Ratio (SR) can be used to classify firms into three classes
of diversification. Its logic reflects the importance of the firm's core product market to that
of the rest of the firm. Operationally, SR is a ratio of the firm's annual revenues from its
largest discrete, product-market activity to its total revenues. In the diversification
literature, SR has been one of the methods of choice for measuring diversification. It is easy
to understand and calculate.

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 Values of Specialization Ratios
SR VALUES
Undiversified, Single SR ≥ 0.95
Product Firms
Moderately Diversified 0.95 < SR ≤ 0.70
Firms
Highly Diversified Firms SR < 0.70

The table above classifies firms into three groups-(1) single product firms with SR ≥ 0.95; (2)
moderately diversified firms with SR values between 0.95 < SR ≤ 0.70. This group includes
dominant, relatedly diversified and unrelatedly diversified firms; (3) the highly diversified
category of firms have SR < 0.70 and include conglomerates, relatedly-constrained and
relatedly-linked firms. A firm is moderately diversified if its sales from its dominant business
lies between 95 percent and 70 percent of its total sales, and a firm highly diversified if the
sales from its dominant business are below the 70 percent mark.

EXAMPLE OF TATA GROUP Let us take the example of Tata Group and calculate its SR
to determine its level of diversification.

TOTAL REVENUE (for 2008 - 2009) Rs. 325,334 crores

SECTOR CONTRIBUTING MOST TO TOTAL REVENUE Materials
REVENUE FROM LARGEST CONTRIBUTOR Rs. 146,400 crores
SPECIALIZATION RATIO 0.45 (i.e. 45%)
Source: http://www.tata.com/htm/Group_Investor_GroupFinancials.htm

Thus, referring to the table above, we can clearly see that Tata Group is a highly diversified
company.

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, horizontal and conglomerate:

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CONCENTRIC DIVERSIFICATION This means that there is a technological similarity
between the industries, which means that the firm is able to leverage its technical know-
how to gain some advantage. For example, a company that manufactures industrial
adhesives might decide to diversify into adhesives to be sold via retailers. The technology
would be the same but the marketing effort would need to change. It also seems to increase
its market share to launch a new product which helps the particular company to earn profit.

HORIZONTAL DIVERSIFICATION The company adds new products or services that are
technologically or commercially unrelated (but not always) to current products, but which
may appeal to current customers. 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. In other words, this strategy tends to increase the firm's
dependence on certain market segments. For example company was making note books
earlier now they are also entering into pen market through its new product.

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. The conglomerate diversification has very little
relationship with the firm's current business. 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.

RATIONALE FOR DIVERSIFICATION According to Calori and Harvatopoulos

(1988), there are two dimensions of rationale for diversification. The first one relates to the
nature of the strategic objective: diversification may be defensive or offensive.

Defensive reasons may be spreading the risk of market contraction, or being forced to
diversify when current product or current market orientation seems to provide no further
opportunities for growth. Offensive reasons may be conquering new positions, taking
opportunities that promise greater profitability than expansion opportunities, or using
retained cash that exceeds total expansion needs.

The second dimension involves the expected outcomes of diversification: management may
expect great economic value (growth, profitability) or first and foremost great coherence
and complementary to 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.

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WHY DIVERSIFICATION? The two principal objectives of diversification are:
1. improving core process execution, and/or
2. enhancing a business unit's structural position

The fundamental role of diversification is for corporate managers to create value for
stockholders in ways stockholders cannot do better for themselves. The additional value is
created through synergetic integration of a new business into the existing one thereby
increasing its competitive advantage.

Ultimately, the responsibility of managers is to maximize the wealth of the owners or the
shareholders. If diversification efforts are consistent with the objective of owners, then it is
a good idea. When the firm diversifies, the growth of sales becomes less vulnerable to
industry-specific events, which reduces the risk faced by managers whose performance is
tracked by behavior of firm profits. Therefore reducing volatility is attractive to the top
management. This is most sharply observed when the CEO is given a bonus as percent of
profits: with diversification, the volatility of profits diminishes and the year-to-year income
of the manager becomes more stable.

Another effect of diversification is through the size of firms. Firms diversifying through
acquiring other firms increase in size. Many of the hidden payoffs to top management (like
perks and prestige) are a function of the sheer size of the company.

CASE IN POINT: TOYOTA, NISSAN, AND HONDA In late 1980s, Toyota , Nissan, and
Honda moved into adjacent market segments. They launched luxury cars Lexus, Infinity, and
Acura respectively to compete with BMW and Mercedes. The Japanese cars were priced
about one-third lower and had a superior service network. The value proposition was solid
enough to win over potential and current BMW and Mercedes customers, despite the
power of their brands. Yet the Japanese also expanded this profitable segment as a whole.

Let us now consider, in detail, the reasons why a company diversifies.

1. ECONOMIES OF SCALE AND SCOPE (SYNERGY) The merger of two companies

producing similar products should allow a firm to pool production and attain lower
operating costs. The economy may come from reduced overhead or the ability to spread a
larger amount of production over lower (consolidated) fixed costs. There may also be
differential management capabilities: an efficiently managed firm may acquire a less
efficient firm with the intent of bringing better management to the business. Efficiencies can
also be gained through pooled financial resources or simply through pooled risk.

Examples of Economies of Scope

Levi Straus jeans for men - expanded to jeans for women and children (exploits product
manufacturing capacity)

Humana - hospitals and HMO's (exploits shared knowledge of patient care)

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IBM - mainframes and PC (exploits brand identity/technology through shared
marketing/production/distribution efficiencies)

2. MARKET POWER Mergers and acquisitions can increase a firm's market share when
both firms are in the same business. The acquisition by Advance Auto Parts of Sears'
Western Auto propels this Virginia-based privately held firm into one the nation's largest
retailer of automotive parts. But, market share does not necessarily translate to higher
profits or greater value for owners unless it substantially reduces market rivalry. Then, the
problem is the prospect of anti-trust action by the Justice Department.

3. PROFIT STABILITY Acquisition of new business can reduce variations in corporate

profits by expanding the corporation's lines of business. This typically occurs when the core
business depends on sales that are seasonal or cyclical. Farmers plant a spring crop and a
fall crop precisely to ensure year-round income from the sale of products.

Hallmark: An Example of Diversification for Profit Stability

Perhaps no industry is more subject to seasonal cycles that manufacturers of greeting cards.
Predictably, sales are highest at traditional holidays. Privately owned, Hallmark Cards, Inc.
and its Ambassador subsidiary have a 44% share of the greeting card market . In 1910 Joyce
Hall as an eighteen year old started selling post cards from his rented YMCA room in Kansas
City, Missouri. In 1911 Joyce's half-brother joined the fledgling enterprise and greeting cards
were added to the product line. Hall Brothers store was established specializing in
postcards, gifts, books and stationary. When a 1915 fire destroyed everything, the brothers
obtained a loan, bought an engraving company and began producing greeting cards in time
for Christmas. In 1928 the company covered the U.S. market and introduced gift wrap. In
1936 the company introduced the case display for their cards. In 1950 Hall Brothers opened
their first greeting card store and in 1951 began its "Hallmark Hall of Fame" television
production. The company has consistently expanded its lines of products to insure against
the seasonal nature of its core product. In the 1980's Hallmark acquired Binney and Smith,
manufacturer of Crayola Crayons and Magic Markers, and Univision, a Spanish language TV
network. In 1990 the company acquired Dakin, manufacturer of plush toys. Hallmark also
owns the portrait studio chain Picture People and continues to expand its TV programming
through Hallmark Entertainment. Diversification strategies also apply to the more general
case of spreading market risks: adding products to the exiting lines of business can be
viewed as analogous to an investor who invests in multiple stocks to "spread the risks".
Diversification into other lines of business can especially make sense when the core product
market is uncertain.

Philip Morris: Diversification Away from the Core Business

Anticipating that the cigarette industry would decline in the future, Philip Morris decided to
diversify its product offerings and looked for acquisitions of unrelated products to decrease
dependence on the future of tobacco. In 1970 it acquired Millers' Brewing for $ 227 million.
Miller was the eight largest U.S. brewer with a 4.4% market share. Philip Morris increased
Miller production, introduced new lines of products (Miller Malt Liquor, Milwaukee Ale,
Miller Ale), acquired Meister Brau in 1972, and in 1975 introduced Miller Lite. By 1972,

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under Philip Morris Miller grew to the 3rd largest brewer, behind Schlitz; in 1980, Miller
overtook Schlitz to become the second largest brewer. Today Philip Morris Companies is a
holding company with a diversified product offering: Miller Brewing, General Foods
(acquired, 1985), Kraft, Oscar Meyer (acquired, 1981), and Philip Morris. In 1989, tobacco
products accounted for 40% of sales, food products ac counted for 51%, and beer accounted
for 8%.

Financial theorists argue that the impact of diversified business portfolios for corporations is
that the corporation has replaced the traditional role of the investor in picking winners and
losers in industry investments. This raises the agency problem: why should investors protect
management from market risks by funding diversification of the firm - the risk minimization
benefit accrues to the manager in terms of job security. So, question is: does diversification
accrue benefits to investors?

4. IMPROVE FINANCIAL PERFORMANCE Large firms generate cash that can be

invested in other ventures. The firm acts as a banker of an internal capital market.. Sharon
Oster cites the example of The Children's Television Network using funds generated by its
Sesame Street production to strategically piggyback. That is, the core business sustains itself
on its money making ventures, and uses this cash flow to create new ventures that generate
additional profits.

5. GROWTH Diversification is simply a way to grow. Indeed, some authorities cite growth
as the principle reason for diversification. Unlike natural growth which takes time for
planning, developing, and implementing a new project, an acquisition or merger can be
achieved fairly quickly with a staff, systems, technology and experience immediately
available.

TCI: A Growth Company

Telecommunications, Inc. (TCI) has been a fast growth communications company, expanding
mainly through acquisitions. TCI began in 1956 when a Texas rancher, Bob Magness, sold
some cattle to start a cable TV system in Memphis, Texas (a Texas Panhandle town). In 1965
Magness expanded to service small Rocky Mountain towns. In the mid-1970's when TV
cable operators were struggling, Magness bought their operations at discount prices and
continued to expand. In 1986 he bought United Artists Communications, the largest
operator of movie theaters and cable tv franchises. TCI through debt financing continued to
acquire communications and cable operations, including part ownership of Turner
Broadcasting (TBS, TNN, and CNN). Partial ownership was acquired in BET, Showtime and
the Movie Channel, the Discovery Channel, Think Entertainment, and American Movie
Classics. As the company also sought growth opportunities outside the cable tv industry, TCI
organized as a holding company of three companies, each selling its own stock:

TCI Group is the subsidiary housing the firm's original cable systems, whose 14 million
subscribers place TCI ahead of Time Warner as the #1 US cable operator.

Liberty Media oversees TCI's financial investment in over 90 cable networks, including CNN
and Discovery, TCI Music, DMX (a 24-hour commercial-free music station distributed via

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cable TV, satellite, and custom CDs), The Box Worldwide (interactive music video channel),
and Paradigm Music Entertainment (web site and record label).

TCI Ventures encompasses everything else, including international cable operations and
telephony, Internet, satellite, and national digital video services interests. TCI's investments
include stakes in PRIMESTAR and international cable operations and related ventures.

TCI in 1980 reported sales of $124 million and in 1996 had sales of $8,022 million,
maintaining its high rate or annual growth.

RISKS ASSOCIATED WITH PRODUCT DIVERSIFICATION

Diversification is the riskiest of the four strategies presented in the Ansoff matrix and
requires the most careful investigation. Going into an unknown market with an unfamiliar
product offering means a lack of experience in the new skills and techniques required.
Therefore, the company puts itself in a great uncertainty. Moreover, diversification might
necessitate significant expanding of human and financial resources, which may detracts
focus, commitment and sustained investments in the core industries. Therefore a firm
should choose this option only when the current product or current market orientation does
not offer further opportunities for growth.

The main dangers facing a company following a product diversification strategy for a brand
are that it could fail to adequately understand the new customer base and that any new
brand name may result in loss of meaning for the original brand and/or cannibalization of
the original brand, particularly if it is a brand extension.

The risk of not understanding the new customer base is present as it is with market
development. And the risks of loss of meaning and/or cannibalization are just as significant
as with product development.

For every successful magazine like Teen People, however, there are many more that are
unsuccessful. All of the women's sports magazines failed, for example. The new market
(women) was not interested in the new product (new magazines with various titles) since—
unlike men—women did not want to read a magazine about sports without some link to
fitness. And the few who did buy the new magazines simply switched from the men's
versions.

In order to measure the chances of success, different tests can be done:

1. The attractiveness test: the industry that has been chosen has to be either attractive
or capable of being made attractive.
2. The cost-of-entry test: the cost of entry must not capitalize all future profits.
3. The better-off test: the new unit must either gain competitive advantage from its
link with the corporation or vice versa.

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Because of the high risks explained above, many companies attempting to diversify have led
to failure. However, there are a few good examples of successful diversification:

1. Virgin Media moved from music producing to travels and mobile phones
2. Walt Disney moved from producing animated movies to theme parks and vacation
properties
3. Canon diversified from a camera-making company into producing an entirely new
range of office equipment.

COMPANIES THAT HAVE SUCCESSFULLY DIVERSIFIED

Hindustan Unilever Limited (HUL) is a subsidiary of Unilever, one of the world’s leading
suppliers of fast moving consumer goods with strong local roots in more than 100 countries
across the globe with annual sales of about €40 billion in 2009 Unilever has about 52%
shareholding in HUL.

Hindustan Unilever was recently rated among the top four companies globally in the list of
“Global Top Companies for Leaders” by a study sponsored by Hewitt Associates, in
partnership with Fortune magazine and the RBL Group. The company was ranked number
one in the Asia-Pacific region and in India.

The mission that inspires HUL's more than 15,000 employees, including over 1,400
managers, is to help people feel good, look good and get more out of life with brands and
services that are good for them and good for others. It is a mission HUL shares with its
parent company, Unilever, which holds about 52 % of the equity.

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HUL believes that an organization’s worth is also in the service it renders to the community.
HUL is focusing on health & hygiene education, women empowerment, and water
management. It is also involved in education and rehabilitation of special or underprivileged
children, care for the destitute and HIV-positive, and rural development. HUL has also
responded in case of national calamities / adversities and contributes through various
welfare measures, most recent being the village built by HUL in earthquake affected
Gujarat, and relief & rehabilitation after the Tsunami caused devastation in South India.

The company has a distribution channel of 6.3 million outlets and owns 35 major Indian
brands. Some of its brands include Kwality Wall's ice cream, Knorr soups & meal makers,
Lifebuoy, Lux, Breeze, Liril, Rexona, Hamam and Moti soaps, Pureit water purifier, Lipton
tea, Brooke Bond tea, Bru coffee, Pepsodent and Close Up toothpaste and brushes, and
Surf, Rin and Wheel laundry detergents, Kissan squashes and jams, Annapurna salt and atta,
Pond's talcs and creams, Vaseline lotions, Fair and Lovely creams, Lakmé beauty products,
Clinic Plus, Clinic All Clear, Sunsilk and Dove shampoos, Vim dishwash, Ala bleach, Domex
disinfectant, Rexona, Modern Bread, and Axe deosprays.

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Tata companies operate in seven business sectors: communications and information
technology, engineering, materials, services, energy, consumer products and chemicals.
They are, by and large, based in India and have significant international operations. The
total revenue of Tata companies, taken together, was $70.8 billion (around Rs325,334 crore)
in 2008-09, with 64.8 per cent of this coming from business outside India, and they employ
around 363,039 people worldwide. The Tata name has been respected in India for 140 years
for its adherence to strong values and business ethics.

Every Tata company or enterprise operates independently. Each of these companies has its
own board of directors and shareholders, to whom it is answerable. There are 28 publicly
listed Tata enterprises and they have a combined market capitalization of some $60 billion,
and a shareholder base of 3.5 million. The major Tata companies are Tata Steel, Tata
Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Tea, Indian
Hotels and Tata Communications.

TATAS IN ASIA PACIFIC

INDIAN SOUTH EAST EAST AUSTRALIA

SUBCONTINEN ASIA ASIA
T
Taj Hotels NatSteel Corus Tata
Resorts and Communicatio
Palaces ns
Tata Tata Tata Tata
Communicatio Communicatio AutoComp Interactive
ns ns Systems
Tata Motors Tata Tata Taj Hotels
Consultancy Communicatio Resorts and

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 Services ns Palaces
Tata Steel Tata Motors Tata Motors Tetley Group
Tata Tea Tata Precision Tata Steel Tata Steel
Industries
Tetley Group Tata Steel Tata Tea Tata Motors
Tata Tata Tata Tata
Consultancy Technologies Consultancy Consultancy
Services Services Services

TATAS IN EUROPE
TATA COMPANIES
 BRUNNER MOND
 JAGUAR LAND ROVER
 TAJ HOTEL RESORTS AND PALACES
 TATA AUTOCOMP
 TATA COMMUNICATIONS
 TATA CONSULTANCY SERVICES
 TATA INTERACTIVE
 TATA AG
 TATA MOTORS
 TATA TECHNOLOGIES
 TETLEY GROUP

TATAS IN CHINA
TATA COMPANIES
 CORUS
 TATA AUTOCOMP
 TATA COMMUNICATIONS
 TATA CONSULTANCY SERVICES
 TATA STEEL
 TATA TEA

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United Breweries Group or UB Group, based in Bangalore, is a conglomerate of different
companies with a major focus on the brewery (beer) and alcoholic beverages industry. The
company markets most of its beer under the Kingfisher brand and has also launched
Kingfisher Airlines, an airline service in India, with international flights operating recently.
United Breweries is India's largest producer of beer with a market share of around 48% by
volume.

The main businesses of the UB Group include:

 Beverage alcohol
 Aviation

BEVERAGE ALCOHOL The UB Group’s diverse range of product in this sector revolves
around 3 major segment, i.e. spirits, wines, and beers.

SPIRITS The main offerings in this segment are given below:

1. Whisky: Royal Challenge, Jura, Dalmore, Whyte & Mackay, Black Dog whisky,
Antiquity rare, Antiquity blue, Signature, McDowell's No.1, McDowell's No.1
Platinum, Bagpiper, Bagpiper Gold, Director’s Special, Old Tavern, McDowell’s Green
Label, DSP Black.

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 2. Rum: Celebration Rum, Old Cask Rum, Old Adventurer Rum
3. Gin: Blue Riband
4. Brandy: Honey Bee, McDowell’s No.1, John Ex-Shaw

KINGFISHER WINES These include:

1. Bouvet Ladubay
2. Four Seasons
3. Bohemia

BEERS These include the following:

Kingfisher Blue - Premium Beer, Kingfisher Red, Kingfisher Strong - Strong Beer, Kingfisher
Premium - Mild Bee, Kingfisher Ultra, Kingfisher Draught, London Pilsner, Zingaro, Sand
Piper, UB Premium Ice, Kalyani Black Label Premium, Kalyani Black Label Strong.

AVIATION Kingfisher Airlines is one of six airlines in the world to have a 5-star rating from
Skytrax, along with Asiana Airlines, Cathay Pacific, Malaysia Airlines, Qatar Airways and

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Singapore Airlines. Kingfisher operates more than 375 daily flights to 71 destinations, with
regional and long-haul international services. In May 2009, Kingfisher Airlines carried more
than a million passengers, giving it the highest market share among airlines in India.

There are two main services offered: Kingfisher Airlines and Kingfisher Red.

KINGFISHER AIRLINES Kingfisher Airlines serves 63 domestic destinations and 8

international destinations in 8 countries across Asia and Europe. Kingfisher's short haul
routes are mostly domestic apart from some cities in South Asia, Southeast Asia and
Western Asia. All short haul routes are operated on the Airbus A320 family aircraft. ATR 42s
and ATR 72s are used mainly on domestic regional routes.

Kingfisher has its medium, long-haul destinations in East Asia, Southeast Asia, and Europe.
Its first long haul destination was London, England which was launched in September 2008.
It has plans to launch new long haul flights to cities in Africa, Asia, Europe, North America
and Oceania with deliveries of new aircraft. All long haul routes are operated on the Airbus
A330-200.

KINGFISHER RED Formerly known as Air Deccan, the airline was previously operated by
Deccan Aviation. It was started by Captain G. R. Gopinath and its first flight took off on 23
August 2003 from Hyderabad to Vijaywada. It was known popularly as the common man's
airline, with is logo showing two palms joined together to signify a bird flying.

In October 2007, after the acquisition by Kingfisher Airlines, Air Deccan was renamed "Simplifly
Deccan" with its new tagline being "The choice is simple". The old logo was replaced by the
Kingfisher logo and the same font of Kingfisher Airlines was also used on Simplifly Deccan. The old
yellow and blue colors of Air Deccan were replaced by Kingfisher Airlines's red and white,
supposedly to give the same premium look and feel to Deccan as well.

The new look airline also promised excellent on-time performance, a wider network and "little
delights all the way". Check-in staff would no longer be outsourced, but managed by the airline's
own employees, thereby "increasing accountability and improving service delivery," said Mr Mallya.
He also announced that the new airline would slowly phase out the ageing ATR 42 and A320 planes
and replace them with entirely new aircraft.

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CONCLUSIONS FROM RESEARCH As is evident from the examples (HUL,
Tata Group, ITC Ltd., and UB Group) given above, we see that these companies pursued
diversification very aggressively and offered a multitude of products to consumers.
Further, increased competition leading to an erosion of market share has forced
companies not only to improve existing products but also to diversify their product range
so as to stay on top of the competition. I addition, a large and diversified product range
greatly increases the probability of a consumer to pick your brand (say in a supermarket).

So the formulated hypothesis is valid according to the examples

taken and it is diversification that leads a company towards long-
term growth and development

----xxxx----

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