To find out more, including how to control cookies, see here: And on the other side, the diversification analysis might over-estimate the benefits to be gained in synergies. Comments 0 Please log in to add your comment. And remember that your plan for strategy in business needs to be reviewed on a regular basis and be adapted as market and economic conditions change. Scholes, Kevin Richard Whittington:
With a related diversification strategy you have the advantage of understanding the business and of knowing what the industry opportunities and threats are; yet a number of related acquisitions fail to provide the benefits or returns originally predicted.
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Diversification is a form of corporate strategy designed to improve opportunities for growth and profitability. Companies can diversify their business by offering new products to existing customers or entering new markets with existing products or new products. A successful diversification strategy can help a company increase sales and revenue, as well as grow market share. Introducing new products or modifying existing products can provide new revenue streams and increase overall turnover and profit.
Diversifying a product range may also give a company higher margins compared with existing products. Entering new markets where there is little competition can enable a company to set prices that win market share without sacrificing profit margins. However, diversification also incurs development, sales and marketing costs. If those costs exceed the potential revenue and profit gains, diversification can be a disadvantage. Diversification can also divert investment and operating funds away from existing activities, limiting potential growth in those areas.
Diversification also requires additional management and operational resources. Stand out and be remembered with Prezi, the secret weapon of great presenters. Send the link below via email or IM Copy. Present to your audience Start remote presentation. Do you really want to delete this prezi? Neither you, nor the coeditors you shared it with will be able to recover it again. Comments 0 Please log in to add your comment. Copy of Related Constrained Diversificat Creating downloadable prezi, be patient.
It is usually because the diversification analysis under-estimates the cost of some of the softer issues: And on the other side, the diversification analysis might over-estimate the benefits to be gained in synergies.
It is when a business adds new, or unrelated, product lines or markets. For example, the same phone company might decide to go into the television business or into the radio business. This is unrelated diversification: Why would a company want to engage in unrelated diversification? Because there may be cost efficiencies. Or the acquisition might provide an offsetting cash flow during a seasonal lull.
The driver for this acquisition decision is profit; it needs to be a low risk investment, with high potential for return. New markets and new products or services are usually good diversification opportunities; but consider these opportunities in the context of integrating benefits into a much stronger overall unique value proposition.
For example, if you are a commercial printer and you add basic graphic design services and packaging services to your product line, you will have a leveraged diversification opportunity. You will have saved your client time and money by enabling the client to 'shop' in one-stop providing you can excel at delivering those services.
If you are prepared and able to invest in your business during either good or challenging times, make sure that you develop business performance measures to track the costs and the benefits expected? You need to ensure that the advantages of diversification and the expected benefits from investment are met as you planned.
Ensure that you build those business measures, set up reporting even if it's a manual process , and make sure that someone is accountable for the planned results. Understanding the advantages and disadvantages of unrelated or related diversification strategies is important to the growth of your business.
Do you really want to delete this prezi? Neither you, nor the coeditors you shared it with will be able to recover it again. Delete Cancel. A firm pursuing a related constrained diversification strategy would typically need all of the following EXCEPT a. centralization of some organizational functions for the sake of coordination. b. frequent, direct contact between division managers. c. division managers' rewards . 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.