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Compilation Group

Sanchit Anand (IMBA/4543/12)


Deepanshu Anand
(IMBA/4563/12)

Strategy

A method or plan chosen to


bring about a desired future,
such as achievement of a goal
or solution to a problem

C
or :Levels of Strategy
p
or
at
e
Business
le
level
v
el
Functional level

Corporate level strategy

Stability
strategies

Expansion strategies
Retrenchment strategies
Combination
strategies

No change
strategies
Pause/proc
eed with
caution
strategies
Profit
strategies

Turnaro
Concentration
Integration

Diversificati
on
Cooperation

und
Divestm
ent
Liquidati
on

Simultane
ous
Sequential
Combinati
on

of both

Introduction-

Diversification Strategy

A company is diversified when it is


in two or more lines of business
that operate in diverse market
environments

Strategy-making in a diversified
company is a bigger picture
exercise than crafting a strategy
for a single line-of-business

When Should a Firm


Diversify?

Diminishing growth prospects in present


business

Expand technologies and products


complement

Leverage existing competencies and


capabilities

Reduce costs

Powerful brand name

Why Diversify?

Diversification strategies are adopted to


minimize risk by spreading it over several
business.
Diversification
may
be
used
to
capabilities and business model so as to
maximize organizational strength or
minimize weakness.
Diversification may be the only way out if
growth in existing business is blocked
due to environmental and regulatory
factors.

Strategies for Entering


New Businesses
Acquire
existing
company

Internal start-up

Joint ventures/strategic
partnerships

Acquisition of an Existing
Company

When one company takes over


another and clearly established
itself as the new owner, the
purchase is called an acquisition.

Internal Startup

More attractive when

Parent firm already has most of


needed resources to build a new
business
Internal entry has lower costs
than entry via acquisition
Example- Target Corporation (which
began as an internal startupof the
Dayton's department store chain

Joint Ventures and Strategic


Partnerships

A joint venture (JV) is a business


agreement in which the parties agree
to develop, for a finite time, a new
entity and new assets by contributing
equity. They exercise control over the
enterprise and consequently share
revenues, expenses and assets.
Example- Maruti Suzuki, Hero Honda

Basic Strategic Alternatives in


Diversification

Related
Diversificati
on or
Concentric

Unrelated
Diversificatio
n or
Conglomerat
e

What Is Related Diversification?

A process that takes place when a


business expands its activities into
product lines that are similar to
those it currently offers.

For example, a manufacturer of


computers might begin making
calculators as a form of related
diversification
of
its
existing
business

Another example

Indian farmers and fertilizers cooperative


limited (IFFCO) operates in different
businesses on the basis of their relatedness
to its sole beneficiary-the Indian Farmer. The
primary business of IFFICO is the
production and distribution of fertilizers .
However
,its
related
diversification
strategies has taken it into other
businesses such as general insurance (to
offer insurance risk cover to farmers )

What Is Unrelated Diversification?

A term which refers to the


manufacture of diverse products
which have no relation to each
other. An example of unrelated
diversification in a business could
be a toy manufacturer that is also
manufacturing industrial wiring for
the construction industry.

Another example

The Aditya Birla Group is in a variety


of unrelated businesses such as
aluminum
,business
process
outsourcing ,carbon black, cement
,chemicals ,copper ,fertilizers ,gas
,insulators, retail ,software ,telecom &
textile.

Motives for Diversification

GROWTH

RISK SPREADING

PROFIT