strategic management-diversification strategy

1. CONCENTRIC (or) RELATED DIVERSIFICATION
“Make winners out of every business in your company.
Don’t carry losers.”

2. CONTENT
 INTRODUCTION
 SIX GUDELINES
 TYPES
 ADVANTAGES
 DISADVANTAGES
 CONCLUSION
 REFERNCES

3. STRATEGY
 Strategy involves the action plan of a company for
building competitive advantage and increasing
its triple bottom line over the long-term. The action plan
relates to achieving the economic, social, and
environmental performance objectives; in essence, it helps
bridge the gap between the long-term vision and short-
term decisions.

4. Functional
strategy
Corporate strategy
Business
(Division level strategy)
Hierarchy of Strategy

5. Corporate strategy —
 This strategy seeks to determine what businesses a company
should be in or wants to be in. Corporate strategy determines the
direction that the organization is going and the roles that each
business unit in the organization will plan in pursuing that direction.

6. DIVERSIFICATION
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 objectives and the resources of the company.
There are two types of diversification: concentric and conglomerate.

7. Concentric diversification:
When an organization takes up an activity in such a manner that is
related to the existing business definition of one or more of firms
businesses, either in terms of customer groups, customer’s
functions or alternative technologies, it is called concentric
diversification.
Definition:
According to Business Dictionary.com ‘a company uses
Concentric diversification as a means of entering new consumer
markets and driving sales in those markets ;

8. Example of Concentric Diversification
A sewing machine manufacturer starts manufacturing
Kitchen appliances (Wider Industry situation –
Women as concentrated target group, Kitchen
appliances as concentrated product range etc)

9. 
EXAMPLE:
TV Company pursues a
diversification strategy of producing
DVD PLAYER
(Brands:
Onida,Philips,LG,Videocon,
Sony,Samsung Etc..,)
HI

10. EXAMPLE

12. i. When an organization competes in a no growth or a slow growth
industry.
ii. When adding new, but related, products would significantly
enhance the sale of current products.
iii. When new, but related products could be offered at highly
competitive prices.
iv. When new, but related products have seasonal sales levels that
counter balance an organic cycle.
v. When an organization ‘s products are currently in the declining
stage of the product life cycle.
vi. When an organization has a strong management team.
Six guidelines when related diversification
may be an effective strategy as follows

13. TYPES:
Marketing-related concentric diversification
Technology-related concentric diversification
Marketing and Technology-related concentric diversification

14. Marketing-related concentric diversification
When a similar type of product is offered with the help of unrelated
technology.
Example:
Eureka Forbes which is noted for its innovative marketing practices,
has diversified into related products. It has entered into strategic
alliance with Morphy Richards, Kenwood and Nilfisk for electric iron
and food processors. They were test marketed at Bangalore. It is an
instance of Marketing-related concentric diversification

15. Technology-related concentric
diversification
When a new type of product or service is provided with the help of
related technology.
Example:
The addition of tomato ketchup and sauce to the existing "Maggi"
brand processed items of Food Specialties Ltd. is an example of
Technology-related concentric diversification

16. Marketing &Technology-related concentric
diversification
When a similar type of product or service is provided with the help of
related technology.
Example
Usha International has diversified into home appliances like juicer,
mixer, geyser, vacuum cleaners and washing machines and exhaust
fans and tries to exploit its distribution of network of over 3,500
dealers to sell its new products. . It is an instance of Marketing
&Technology-related concentric diversification

17. Advantages or Benefits
Opportunities to achieve economies of scale and scope through skill
transfers, lower costs, common brand name, technology, etc.
Opportunities to expand product or service offerings and preserve unity
in businesses
Increased Market Share
Increase usage by present customers
Attract competitor‘s customers

18. Disadvantages
Complexity and difficulty of coordinating different, but related businesses
(e.g. Philip Morris’ General Food and Kraft general foods)
Increase in risk and commitment
Reduction in Flexibility
Increase rate of product obsolescence
Difficulty in the supply of raw material

19. Conclusion
Concentric diversification empowers a company to build
competitive advantage over competitors. It increases market
opportunity, thereby it increases turnover and profit of the
concern.

20. REFERENCES
WEB:
 www.coursehero.com › ... › STRATEGY › STRATEGY 603
 www.strategy-formulation.24xls.com/en425
 http://slideplayer.com/slide/4780629/
BOOK
 Strategic Management-Fred R David
 Strategic Management-L.M Prasad
 Essentials of Strategic Management-Jones

21. TIME TO REFRESH
 --------------------Involves diversifying into businesses whose value chains
possess competitively valuable “strategic fits” with value chain(s) of firm’s
present business
 --------------------Involves diversifying into businesses with no competitively
valuable value chain match-ups or strategic fits with firm’s present business
 -------------------------finance-driven approach
 ------------------------- strategy-driven approach
 Past business of Wipro is------------------------------whether it related or
unrelated?

22. THANK YOU
T.BOOMA
II M.COM*