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.
are small and cannot afford to try
have no power to sustain
anticipate some pitfalls
are the first to bell the cat in that area.
When on checking they find their functional skills
are insufficient to diversify
don’t want to gamble with public investments
do not have attractive tax benefits after diversification
Tags : Strategic Management - Strategy Formulation
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