Types of Expansion strategiesExpansion through ConcentrationExpansion through integrationExpansion through diversificationExpansion through co-operationExpansion through InternationalisationExpansion through digitalisation
CONCENTRATION STRATEGIESWhen an organisation focuses on intensifying its core businesses with a view on expanding through either acquiring a new customer base or diversifying its product portfolio, it is having a concentration strategy
Market Penetration - the firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share. Market Development - the firm seeks growth by targeting its existing products to new market segments. Product Development - the firms develops new products targeted to its existing market segments. Diversification - the firm grows by diversifying into new businesses by developing new products for new markets.
TYPES OF CONCENTRATION STRATEGIESMARKET PENETRATION – Selling more products in the same marketMARKET DEVELOPMENT – Selling same products to new marketsPRODUCT DEVELOPMENT – Selling new products to the same marketExample:Bajaj Auto has undertaken all the above mentioned strategies
INTEGRATION STRATEGIESIntegration means combining activities related to the present activity of a companyIntegration is part of the diversification strategyIt widens the scope for a company as far is the market penetration is concerned.
TYPES OF INTEGRATION STRATEGIESHorizontal IntegrationVertical Integration
HORIZONTAL INTEGRATIONHorizontal Integration: When an organization takes up the same types of products at the same level of production or marketing process, it is said to follow a strategy of Horizontal Integration (Also known as Merger/Acquisition)Example: Takeover of Satyam by Mahindras
VERTICAL INTEGRATION Vertical Integration: Expansion to serve its own needs. Vertical Integration is of two types, namely Backward and Forward Integration - Backward Integration means going back to the source of raw materials(Example: A Thermal power company may do coal-mining) - Forward Integration implies moving closer to the finished product (example: A car spare parts manufacturer would start manufacturing passenger cars)
DIVERSIFICATION STRATEGIESConcentric or Related DiversificationConglomerate or Unrelated Diversification
CONCENTRIC OR RELATED DIVERSIFICATIONWhen an organization takes up related activities within a wider industry situation, it is termed as “Concentric Diversification”Example:A sewing machine manufacturer starts manufacturing Kitchen appliances (Wider Industry situation – Women as concentrated target group, Kitchen appliances as concentrated product range etc)
Types of Concentric Diversification Marketing Marketing- Technology- and related related Technology- concentric concentric relateddiversification diversification concentric diversification
CONGLOMERATE OR UNRELATED DIVERSIFICATION A conglomerate is a Unrelated of two Conglomerate or combination Diversification or more corporations engaged in entirely different businesses that fall under one corporate group, usually involving a parent company and many subsidiariesIn other words, a conglomerate takes up such activities which are unrelated to the core business.
EXAMPLES OF CONGLOMERATESTATA GROUPADITYA BIRLA GROUPITC GROUPTTK GROUPRELIANCE
ORGANISATIONS WHICH SELDOM DIVERSIFYPublic Sector EnterprisesNon Government Organisations (NGOs)
REASONS OF DIVERSIFICATIONMinimizing RiskCapitalize on StrengthsProvide a new perspective in business
Risks of DiversificationUnrelated diversification is complex and confusingDiversification demand a wide variety of skillsDecreasing commitment on the core businessOften results in lossesIncreases the administrative costs