Diversification is an act of an existing entity branching out into a new business opportunity. This corporate strategy enables the entity to enter into a new market segment which it does not already operate in. The decision to diversify can prove to be a challenging decision for the entity as it can lead to extraordinary rewards with risks. Some very famous success stories of diversification are General Electric and Disney. However, the entry of Quaker oats into the fruit juice business, Snapple lead to a very costly failure.

For example, a dairy company producing cheese adds a new variety of cheese to its product line. This form of diversification takes place when a company goes back to a previous or next stage of its production cycle. For example, a company involved in the reconstruction of houses starts selling construction materials and paints.

It may be forward integration or backward integration. In this form of a diversification strategy, the entity introduces new products with an aim to fully utilize the potential of the prevailing technologies and marketing system. For example, a bakery making bread starts producing biscuits. In this form of diversification, an entity launches new products or services that have no relation to the current products or distribution channels.

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A firm may adopt this strategy to appeal to an all-new group of customers. The high growth scope and return on investment in a new market segment may prompt a company to take this option. For that, first of all, we should project the cash flows for the new line of business. These cash flows should be discounted with the risk-adjusted discounting rate.

In order to find risk-adjusted discounting rate, we have to take help of proxy firm. Proxy firm means a company already dealing in that new line of business. A diversification must be a well thought out step for an entity. It can boost the growth of the firm thereby leading it towards wealth maximization. However, it can also prove to be a costly failure for certain entities.

A detailed analysis of the potential market must be conducted before opting for diversification. He is passionate about keeping and making things simple and easy. Running this blog since and trying to explain "Financial Management Concepts in Layman's Terms". Thanks for your whole hard work on this web site. We notice all concerning the dynamic medium you offer both interesting and useful steps on your web site and as well cause participation from other ones on that area of interest while my daughter is actually understanding a lot.

Strategic Management - Diversification

View Itc-Business-Strategy. Disneyland is another great example of a successful business model that has been copied all over the world. ITC hotels are one of the fastest-growing hospitality chains in India. Put simply, it's a clear set of plans, actions and goals that outlines how a business will compete in a particular market, or markets, with a product or number of products or services. ITC is India 's foremost multi-business enterprise with its robust portfolio of traditional and Greenfield businesses.

ITC found opportunity and decided to enter the foods segment as there was a lot of scope for the branded player. Apsey is responsible for the strategic vision and overall business operation of ITC and its subsidiaries. The Agri business is expected to grow by If you continue browsing the site, you agree to the use of cookies on this website. An overview of Strategy in ITC Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Limited in When we think of Google, that's easy to think of it as the most significant tech success of the last decades.

ITC regularly creates new products in its domains to expand its product portfolio. This strategy has helped ITC to quickly establish itself in the above mentioned businesses. These subsidiaries are essentially clones of the home operations, since the business model and its success recipe are simply copied and pasted abroad. Strategy: Risk-averse traders can consider a bull-call spread on ITC. IT strategy information technology strategy is a comprehensive plan that outlines how technology should be used to meet IT and business goals.

Apple business strategy can be characterised as vertical integration in a way that the company has advanced expertise in software, hardware, and services at the same time. The product lines have great product length and depth. ITC often introduces new products in its existing markets as a part of its product development strategy. The company has been benefiting from its vertical integration is one of the major factors that set it apart the!

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Diversification and Corporate Strategy

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