Description
the diversification strategy for companies. It explains reasons for diversification and various ways for diversification.
Diversification Strategy
Facets for Diversified Companies
? Pick new industries to enter & decide on means
of entry ? Boost combined performance of all businesses ? Leverage cross business value chain relationships ? Prioritize investment as per the attractiveness of business units
When to diversify?
? Building shareholder value – The ultimate
justification
? Industry attractiveness test ? Cost of entry test ? Better-off test
Path to diversify
? Internal start-up
? Acquisition ? Joint venture
………. Diversification Levels
? Low levels
? Moderate to high levels ? Very high levels
Reasons for diversifying
? Value Creation
? Economies of Scope ? Market Power ? Financial Power
Reasons for diversifying
? Value Neutral
? Anti trust regulation ? Tax laws ? Risk reduction ? Low performance
Related diversification
? Cross business fit along value chain
? Strategic fit & economies of scope
Unrelated diversification
? Merits a consideration ?
? Drawbacks
Diversification & Competitive Advantage
? Rarity
? Possibility of Imitation
Diversification in International Context
? Financial Risks
? Currency Fluctuations ? Hedging
? Political Risks
? Types ? Quantifying ? Managing
Evaluating strategy for a diversified company
? Industry attractiveness
? Business unit competitive strength
? Competitive advantage potential of cross
business strategic fit ? Resource fit ? Resource allocation ? New moves to improve corporate performance
Diversified companies – main alternatives
? Broaden business base
? Divest to narrow business base ? Restructure business line-up
doc_540356664.pptx
the diversification strategy for companies. It explains reasons for diversification and various ways for diversification.
Diversification Strategy
Facets for Diversified Companies
? Pick new industries to enter & decide on means
of entry ? Boost combined performance of all businesses ? Leverage cross business value chain relationships ? Prioritize investment as per the attractiveness of business units
When to diversify?
? Building shareholder value – The ultimate
justification
? Industry attractiveness test ? Cost of entry test ? Better-off test
Path to diversify
? Internal start-up
? Acquisition ? Joint venture
………. Diversification Levels
? Low levels
? Moderate to high levels ? Very high levels
Reasons for diversifying
? Value Creation
? Economies of Scope ? Market Power ? Financial Power
Reasons for diversifying
? Value Neutral
? Anti trust regulation ? Tax laws ? Risk reduction ? Low performance
Related diversification
? Cross business fit along value chain
? Strategic fit & economies of scope
Unrelated diversification
? Merits a consideration ?
? Drawbacks
Diversification & Competitive Advantage
? Rarity
? Possibility of Imitation
Diversification in International Context
? Financial Risks
? Currency Fluctuations ? Hedging
? Political Risks
? Types ? Quantifying ? Managing
Evaluating strategy for a diversified company
? Industry attractiveness
? Business unit competitive strength
? Competitive advantage potential of cross
business strategic fit ? Resource fit ? Resource allocation ? New moves to improve corporate performance
Diversified companies – main alternatives
? Broaden business base
? Divest to narrow business base ? Restructure business line-up
doc_540356664.pptx