Presentation on

“ Diversification
Strategies ”
Presented by,
Roseline Rozario
Ruchika Singh Parihar.
Manjiri A. Khanzode.
DIVERSIFICATION

 Diversification is a set of strategies. these strategies involve all
the dimensions of strategic involvement. it may involve
internal pr 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.

DIFFERENT TYPES OF DIVERSIFICATION
STRATEGIES

 Concentric 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.

Concentric diversification is of three types:

MARKETING RELATED DIVERSIFICATION.

TECHNOLOGY RELATED DIVERSIFICATION.

MARKETING AND TECHNOLOGY RELATED
DIVERSIFICATION.
Marketing related concentric
diversification:
 When a similar type of product is offered
with the help of unrelated technology…


Technology related concentric

diversification:
 When a new type of product or service is
provided with the help of related
technology…


Marketing and technology related

concentric diversification:
 when a similar type of product or service
Reasons for concentric
Diversification
Realizing financial synergies in terms of transaction
cost savings and tax savings.

Realizing informational synergies by using common
sources of information, databases and
information networks.

Realizing operational synergies through economies
of scale.

Realizing personnel synergies through utilizing
human resource with common skills and
competencies for another business.

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 Agri bus. FMCG, hotels, IT, Packaging.
REASONS FOR
CONGLOMERATE/UNRELATED
DIVERSIFICATION
Spreading business risks by investing in different
industries.

Maximizing returns by investing in profitable business
and selling out unprofitable ones.

Taking advantage of emerging opportunities afforded by
an expanding economy and encouraging gov. policies.

Migrating from bus. Under threat from the bus.
Environment.

Stabilizing returns by avoiding economic upswings and
downswings through having stakes in different
industries.
ADVANTAGES/DISADVANTAGES
OF CONCENTRIC
DIVERSIFICATION
 (Advantages)
Enable a firm to attain synergy by
exchange of resources and skills.
To avail economies of scale and tax
benefits.


 (Disadvantage)
Increase in risk and commitment
Reduction in Flexibility

ADVANTAGES/DISADVANTAGES
OF CONGLOMERATE
DIVERSIFICATION

 (Advantages)
Better management and allocation of cash flows.
Realizing a high return on investment.
Reduction of risk by spreading investment in
different business and industries.

 (Disadvantages)

Diversion of resources and attention to other areas

leading to a lack of concentration.
Facing the risks of managing entirely new business.
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.



Product Expansion
strategy of leading
brand Mercedes.
Mercedes Benz is a global car company.

It apply diversification strategy by introducing new
Actros tipper to get niche applications.


The truck will address the need of Indian mining

sector.

Diversification is apply considering the demand for
heavy duty tippers by mining sector and huge
power plan of India.

Continue…..
Another sector for diversification is dimension
cargo movement application which can carry
load of 240 tones.

Other applications are like for fighting systems
which in fact considers the Mumbai Fire
Brigade.

They diversified themselves in some of
commercial vehicles which are light, medium,
heavy vehicles.
Examples……
Essar Group:- shipping, marine construction, oil
support services, and iron ,steel.

Shriram Fibers Ltd.:- nylon industrial yarn,
synthetic industrial fabrics, nylon tyre cords,
fluorochemicals, fluorocarbon refrigerant
gases, ball and needle bearings, auto
electrical, hire- purchase and leasing and
financial services.

Reliance ‘ADAG’ Group.
Thank You .