diversification becomes a relevant strategic option when a company course hero

When does diversification become a relevant strategic option?

Diversification becomes a relevant strategic option in all but which one of the following situations? A.When a company spots opportunities to expand into industries whose technologies and products complement its present business. B. When a company is only earning a low profit margin in its principal business.

What is strategic fit in related diversification?

E Strategic fit exists when a company can transfer its brand-name reputation to the products of a newly . acquired business and add to the competitive power of the new business. What makes related diversification an attractive strategy? A. The ability to broaden the company's product line.

What are the corporate strategies for diversification?

To improve the performance of different lines of businesses, a diversified company may consider any or a combination of the following corporate strategies: Divestiture Strategy. Harvest Strategy. Liquidation Strategy. Turnaround Strategy. Restructuring Strategy. Multinational Strategy. 1. Divestiture Strategy

What is the purpose of diversification?

A. In order to reduce risk by way of spreading the company's investments over a set of truly diverse industries. B. To enable a company to achieve rapid or continuous growth.

What is related diversification in strategic management?

Related diversification occurs when a firm moves into a new industry that has important similarities with the firm's existing industry or business lines (Figure 8.11 “The Sweet Fragrance of Success: The Brands That “Make Up” the Lauder Empire”).

What kind of diversification is a company using when it expands into different types of businesses in order to minimize risk?

Horizontal integration occurs when a company expands into a business at the same stage of production as its current business. Since a bookstore and a clothing store are both retail businesses, the purchase involves horizontal diversification.

How does diversification contribute to competitive advantage?

Benefits of diversification Reduces risk due to your investments being spread across multiple areas; if one market fails, success in others will reduce the impact of failure. Helps you gain access to larger market potential, due to lower competition in foreign markets. Increases your business's overall market share.

How would you explain the difference between a one business company and a diversified company?

In terms of strategy making, what is the difference between a one-business company and a diversified company? A. The first uses a business-level strategy, while the second uses a set of business strategies and a corporate strategy.

When diversification is an effective business strategy?

Diversification is a business development strategy in which a company develops new products and services, or enters new markets, beyond its existing ones. Diversification strategy can kick-start a struggling business, or it can further extend the success of already highly profitable companies.

What are the various forms of diversification strategies explain with examples?

Of the three types of diversification techniques, conglomerate diversification is the riskiest strategy. Conglomerate diversification requires the company to enter a new market and sell products or services to a new consumer base. A company incurs higher research and development costs and advertising costs.

Why diversification strategy is important?

The diversification strategy enables companies to find potential markets they can tap into or new products they could launch to increase their sales and revenue.

What are the reasons for diversification?

Here are seven reasons for the support of diversification strategy.1) You get more product variety.2) More markets are tapped.3) Companies gain more technological capability.4) Economies of scale.5) Cross selling.6) Brand Equity.7) Risk factor is reduced.

How does diversification create value for a company?

A company following a diversification strategy can create value for its shareholders only when the combination of the skills and resources of the two businesses satisfies at least one of the following conditions: An income stream greater than what could be realized from a portfolio investment in the two companies.

What is an example of diversification in business?

A company may decide to diversify its activities by expanding into markets or products that are related to its current business. For example, an auto company may diversify by adding a new car model or by expanding into a related market like trucks.

What is an example of a diversified company?

Some of the historically best-known diversified companies are General Electric, 3M, Sara Lee, and Motorola. European diversified companies include Siemens and Bayer, while diversified Asian companies include Hitachi, Toshiba, and Sanyo Electric.

Which one of the following is the best example of related diversification?

Which of the following is the best example of related diversification? stem from cost-saving strategic fits along the value chains of related businesses.

What are the three types of diversification?

There are three types of diversification: concentric, horizontal, and conglomerate.Concentric diversification.Horizontal diversification.Conglomerate diversification (or lateral diversification)

What is diversification through expanded operation?

Definition: The Expansion through Diversification is followed when an organization aims at changing the business definition, i.e. either developing a new product or expanding into a new market, either individually or jointly.

What is horizontal diversification strategy?

a growth strategy in which a company seeks to add to its existing lines new products that will appeal to its existing customers.

Which diversification strategy will a firm implement when it operates in multiple industries or markets simultaneously?

A firm implements a corporate diversification strategy when it operates in multiple industries or markets simultaneously. When a firm operates in multiple industries simultaneously it is said to be implementing a geographic market diversification strategy.

What is the difference between the first and second strategy?

A. The first uses a business-level strategy, while the second uses a set of business strategies and a corporate strategy.

What is the purpose of cultural independence, operating diversity, and sophisticated analytical responsibility on the businesses?

forcing cultural independence, operating diversity, and sophisticated analytical responsibility on the businesses to ensure compatibility with the corporate overhead identity.

What is a business diversification?

involves entering any industry and operating any business where senior managers see opportunity to realize consistently good financial results--there's no deliberate effort to diversify only into businesses with valuable cross-business strategic fits.

What is a diversified business?

A diversified company's business units exhibit good resource fit when. a company has the resources to adequately support the requirements of its entire group of businesses without spreading itself too thin and when individual businesses add to a company's overall resource strengths. Economies of scope.

Why is 1 + 1 = 3 benefits?

it offers ways for a firm to realize 1 + 1 = 3 benefits because the value chains of the different businesses present competitively valuable cross-business relationships. The difference between a "cash-cow" business and a "cash hog" business is that.

What is the advantage of enabling a company to strive for better long-term performance?

has the advantage of enabling a company to strive for better long-term performance by concentrating on building strong positions in a small number of core businesses and industries and avoiding the mistake of diversifying so broadly that resources and management attention are stretched thinly across many businesses.

What is value chain transfer?

to transfer competitively valuable expertise or technology or resources from one business to another and/or combine the related value chain activities of the separate businesses into a single operation to achieve lower costs.

How to determine industry attractiveness?

selecting a set of industry attractiveness measures, weighting the importance of each measure, rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to evaluate the attractiveness of all the industries, both individually and as a group.

What is a ranking of business units?

ranking the company’s business units from competitively strongest to competitively weakest and thereby learn which business units are strong, average, or weak market contenders in their respective industries.

What is a strategy option for a diversified company?

Once a company gets diversified, it becomes a critical obligation on the part of the corporate managers to manage the affairs of the diversified lines of business effectively. To improve the performance of different lines of businesses, a diversified company may consider any or a combination ...

What is multinational diversification strategy?

Multinational Diversification Strategy. A company may follow a strategy of diversifying its business into foreign markets. When a company faces hard times in the domestic market or finds a high prospect in foreign markets, it may undertake a multinational diversification strategy.

What is a turnaround strategy?

Turnaround strategy is the strategy of reverting a weak business unit to profitability. This strategy aims at restoring a losing business unit to profitability. To make a poor company profitable, management may redeploy additional resources, instead of divestment or liquidation.

What is the strategy of selling off a business unit or a division of a unit?

Multinational Strategy . 1. Divestiture Strategy . Divestiture strategy is the strategy of selling off a business unit or a division of a unit because it fails to fetch enough profits for the company or because of its dim prospect of profitability and growth in the future or for some other reasons.

What is restructuring strategy?

Restructuring strategy involves divestment of one or more business units of a diversified company and acquiring new business units.

What is liquidation strategy?

Liquidation strategy is the strategy of writing off a business unit’s investment. This strategy is usually adopted when it becomes difficult to find a buyer for a losing unit.

When is it better to liquidate assets or to close a business?

Liquidation Strategy. When turnaround or defensive strategy is not pragmatic due to reasons beyond the control of the management, it is better to go for closing the business and liquidate the assets. Such a strategy is the last resort when hopeless situations prevail in the company.