Hilda Mphil Diversification 1

Presented ByHILDA MARY.L

MP09394

DIVERSIFICATION“Diversification is only required when investors do not understand what

they are doing.” - WARREN

BUFFETT

OVERVIEW

MEANING ANSOFF MATRIX REASONS FOR DIVERSIFICATION TYPES OF DIVERSIFICATION EXAMPLES

MEANING OF DIVERSIFIED BUSINESS

Business that operates in more than one industry or market and uses different distribution channels as a matter of corporate strategy

A company may attempt to manufacture the products itself or it may acquire or merge with an on going organization

DIVERSIFICATION

Diversification is a set of strategies. these strategies involve all the dimensions of strategic involvement. it may involve internal or external, related or unrelated, horizontal or vertical and active or passive dimensions either singly or collectively.

Diversification involves a substantial change in the business definition singly or jointly in terms of customer functions, customer groups, or alternative technologies of one or more of a firm’s businesses.

PRINCIPAL OBJECTIVES

Improving core process execution

Enhancing a business unit’s structural position

ANSOFF MATRIX

WHAT IS MARKET PENETRATION?

Market penetration refers to a strategy by which an organisation takes increased share of its existing markets with its existing product range

WHAT IS PRODUCT DEVELOPMENT?

Product development refers to a strategy by which an organisation delivers modified or new products to existing markets.

WHAT IS MARKET DEVELOPMENT?

Market development refers to a strategy by which an organisation offers existing products to new markets

WHAT IS DIVERSIFICATION?

Diversification refers to a strategy by which an organisation pursues new product offerings and new markets.

Diversification is a risk management technique that mixes a wide variety of investments within a portfolio (www.investopedia.com).

WHY DIVERSIFICATION STRATEGIES ADOPTED?

Diversification strategies are adopted to minimize risk by spreading it over several businesses. E.g. Seasonal products.

Diversification may be used to capitalize on its capabilities and business model so as to maximize organizational strengths or minimize weaknesses. E.g. co. having Core competency in the area of After sales services.

Diversification may be only out if growth in exiting business in blocked due to environmental and regulatory factors. E.g. cigarette making co.

DIFFERENT TYPES OF DIVERSIFICATON

Concentric diversification Conglomerate diversification

CONCENTRIC DIVERSIFICATION

When an organization takes up an activity in such a manner that it is related to the existing business definition of one or more of a firm’s businesses, either in terms of customer groups, customers functions or alternative technologies, it is called concentric diversification.

Types: MARKETING RELATED TECHNOLOGY RELATED MARKETING AND TECHNOLOGY RELATED.

CONGLOMERATE DIVERSIFICATION

When an organization adopts a strategy which requires taking up those activities which are unrelated to the existing business definition of one or more of its business either in terms of their respective customer groups , customer functions or alternative technologies it is called conglomerate diversification.

Example – The Aditya Birla Group is in a variety of unrelated business such as Aluminum, BPO, Cement ,Chemicals, Software , Telecom, Textiles etc.

Polar Group (Fans , Marble and Granite) ITC Groups is in FMCG, hotels, IT, Packaging.

EXAMPLES OF DIVERSIFIED BUSINESS

P&G TATA RELIANCE PEPSICO ITC

PERSONAL & BEAUTY

Deodorants Soap Hair care Skin Care Oral Care

old spice Olay Head & Shoulder Braun Oral -B

secret Ivory Pantene Gilette Glide

Camay Fixodent

Crest

HOME PRODUCTS

Laundry Care

Paper Products

Batteries Dishwash Coffee

Tide Charmin Duracell Dawn Milestone

Bounce PuffsDuracell

AdvancedJoy Bru

Cheer Ivory

Era

HEALTH & WELLNESS

Health Care Drugs

Vicks Actonel

Bismol Microbid

Align Dantrium

Metamuol Enablex

Prilosec -OTC

Child care Pet care

Pampers Pedigree

luvs Eukanuba

Dreft Lams

Charmin Children

Tata Group

Tata Group is one of the India’s largest and most respected business conglomerates

98 operating companies in seven sectors Group was founded by Jamsetji Tata in the mid 19th century The Tata family of companies shares a set of five core values: integrity,

understanding, excellence, unity and responsibility Tata group has its operations in more than 80 countries across six

continents, and its companies export product and services to 85 countries

Major companies

TCS – Software firm TISCO – iron and steel firm Tata telecommunications Tata tea Inc – major brands are Tata tea, Tetley tea etc., Tata Motors –Indica, Indigo, Nano Tata Construction equipment company

Reliance ADAG Companies

Reliance capital - interest in asset mgt and mutual funds, life and general insurance private equity and proprietary investments and stock broking

Reliance Communications Limited Reliance Energy Limited Reliance Health Reliance Media and Entertainment – ADLABS, Big FM, Mobile TV,

DTH

ITC Ltd

The company was incorporated way back in 1910 under the name IMPERIAL TOBACCO COMPANY OF INDIA LIMITED. Soon it was renamed as I.T.C Ltd. In 1974.The company is market leader in Indian cigarette business

ITC Ltd

FMCG Cigarettes

Food

Lifestyle Retailing

Greetings and stationery

Safety Matches

Incense sticks

Hotels Paperboards and Packaging

Paperboards and specialty papers

packaging

Agri-Business Agri- exports

E-choupal

Information Technology

ITC - Cigarettes

Insignia India Kings Classic Gold Flake Silk Cut, Navy Cut Scissors, Capstan Berkeley Bristol and Flake in its cheap cigarettes portfolio.

PepsiCo Company

PepsiCo, Inc. was established in 1956 Manufacture, market and sell more than 500 products that serve the

needs of consumers of all ages in more than 200 countries. Largest brands include,• Fruit juices (Tropicana and Dole)• Sport Drinks (Gatorade)• Snack Foods (Frito, Lay’s, Ruffles, Doritos, Chee-tos, and Sun

Chips)• Cereals, rice, and breakfast products (Quaker oatmeal, Cap’ n

Crunch, Life, Quaker rice cakes, and Quaker grits)

PepsiCo Company

Doritos Funyuns Frito-Lay, Quaker Lay’s, potato chips Ruffles potato chips Tostitos tortilla chips Fritos corn chips Doritos tortilla chips Cheetos cheese flavored snacks Quaker cereals

7UP Lipton teas Pepsi-Cola, Diet Pepsi, Mountain Dew, Pepsi-Cola, Tropicana, Gatorade Gatorade thirst quencher, Aquafina bottled water Mirinda carbonated soft drinks, Sierra Mist carbonated soft

drinks .