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When To Diversify and When Not Diversify? - Diversification Strategies

   Posted On :  26.06.2018 09:08 pm

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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