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When To Diversify and When Not Diversify? - Diversification Strategies
Strategic Management - Strategy Formulation
When To Diversify and When Not Diversify? - Diversification Strategies
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Diversification merits strong consideration whenever a single-business company is faced with diminishing market opportunities and stagnating sales in its principal business.
When To Diversify
Diversification merits strong consideration whenever a single-business company is faced with diminishing market opportunities and stagnating sales in its principal business. But there are four other instances that signal the for diversifying:
When it can expand into industries whose technologies and products complement its present business.
When it can leverage existing competencies and capabilities by expanding into businesses where these same resource strengths are valuable competitive assets.
When diversifying into closely related businesses open new avenues for reducing costs.
When it has a powerful and well-known brand name that can be transferred to the products of other businesses.
When Not Diversify?
All the organizations cannot think of diversification as a strategy.
Organizations do not diversify under the following conditions.
When they are small and cannot afford to try
When they have no power to sustain
When they anticipate some pitfalls
When they are the first to bell the cat in that area.
When on checking they find their functional skills are insufficient to diversify
When they don’t want to gamble with public investments
When they do not have attractive tax benefits after diversification
Tags : Strategic Management - Strategy Formulation
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